AMD stock analyst announces unexpected price target

When two heavyweights fight, step back and let the chips fall. AMD and Nvidia (NVDA) are the tech giants, and the chips are semiconductors that can fulfill artificial intelligence's growing demands.

A November Deloitte report predicted a $50 billion market for generative AI-optimized semiconductors by 2024. The business expects that sum to account for two-thirds of AI-chip sales in 2022, up from almost zero.

Deloitte forecast AI-chip sales of 11% of the $576 billion global semiconductor industry this year. The business reported 2027 AI chip industry projections ranging from $400 billion to $110 billion.

Deloitte said "the major chip companies as well as others have built or are building chips that are specially optimized for generative AI, as older AI chips are too slow or too inefficient to do it well and are lacking the right kind of design and memory." CPUs can be used for lesser AI tasks, but as AI progresses, CPUs are becoming less useful.

As the AI-led investment surge continues, economists expect the S&P 500, which is on track for one of its greatest first-quarter rises in decades, to have much more to offer this year.

This gathering centers on AMD and Nvidia. Nvidia, the top manufacturer of AI-training and AI-running processors, has seen its shares soar. The AI-chip maker's stock rose more than $277 billion on Feb. 22, the greatest market increase in U.S. history, and the S&P 500 reached an all-time high of 5,087.03 points.

Revenue more than quadrupled to $21.1 billion, while Nvidia announced adjusted fourth-quarter earnings of $5.16 a share, nearly sixfold more than the year-earlier period. The company's market cap was $2.134 trillion last check.

AMD announced fourth-quarter earnings of 77 cents a share on Jan. 30, up 11.5% from the year-ago period and matching Wall Street's expectations. Revenue grew 10% to $6.17 billion, beating analysts' $6.12 billion projection.

On the results call, CEO Lisa Su reminded analysts that “we closed multiple wins with large financial, energy, automotive, retail, technology and pharmaceutical companies, positioning us well for continued growth, based on expanded production deployments planned for 2024.”

The MI300X may rival Nvidia's H100 GPU in the large language model AI industry, according to analysts. Last month, Huatai Research researcher Purdy Ho claimed “AMD’s MI300 is one of the most competent products poised to challenge Nvidia.”

On March 4, Barclays analyst Tom O'Malley boosted AMD's price target to $235 from $200 and maintained an overweight rating. In a semiconductor industry study, the analyst stated that customer MPU shipments were greater than projected in December but are pointing to a major reset in March.

Mid-single-digit increase in client MPUs and mid-single-digit decreases in servers are expected for the year, with AMD gaining share in both sectors. "We continue to see AMD taking share in the server market in 1Q24 and holding share stable through the remainder of the year, moving from 25% in 4Q23 to 27% through 2024," the writer said.

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