Advanced Micro Devices (AMD) has been explosive. In fact, since April, AMD has run from a low of about $200 to a recent high of $562.99, with further potential upside likely.
www.barchart.com Firstly, there’s massive AI accelerator demand. Its MI300 and next-generation AI accelerators are gaining traction among hyperscalers, cloud providers, and other tech giants. Secondly, investors are betting that AI spending is still in the early innings, with data center operators expected to spend hundreds of billions of dollars on AI infrastructure over the next several years. And thirdly, Wall Street has also become increasingly bullish on the stock. Citigroup recently upgraded AMD to a “Buy” rating and raised its price target to $575, citing the company's growing opportunity in the graphics processing unit (GPU) market. Meanwhile, Bank of America increased its price target to $560 while maintaining a “Buy” rating, and Bernstein raised its target to $525 with an “Outperform” rating.
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AMD’s Acquisition of MEXT Was Another Key Catalyst
Fueling further upside, AMD just acquired MEXT, a memory optimization company, to help solve memory constraints with growing AI workloads.
The problem, says Morgan Stanley, is that AI demand is being met with substantial shortage issues in the global memory market, which is sharply driving memory prices higher. Morgan Stanley added that “surging memory prices and supply scarcity are becoming a risk across the digital economy. What began as an AI infrastructure bottleneck is now spreading into hardware margins, device affordability, cloud costs, inflation, and policy,” as noted by Barron’s.
However, there may be a solution. According to a MEXT press release, the company claims it can cut memory costs by nearly half, while expanding usable memory capacity by two to four times. And, as noted in an AMD press release, MEXT “technology can help make flash storage behave more like DRAM, helping expand usable memory capacity while maintaining performance and efficiency. This approach has the potential to reduce infrastructure costs, improve resource utilization, and help customers more effectively scale general-purpose and AI workloads.”
In short, with a memory bottleneck, MEXT technology could help save companies quite a bit of money and make AMD even more attractive.
Earnings Have Been Just as Impressive
The company just posted an impressive first-quarter, posting earnings per share of $1.37, beating Wall Street expectations by eight cents. Revenue hit $10.25 billion, a 37.8% increase year-over-year (YoY) and surpassing estimates by roughly $330 million. All thanks to the strong demand for AI infrastructure and data center products. AMD’s Data Center segment revenue climbed 57% to $5.78 billion. Growth was fueled by continued demand for the company’s AI accelerators, along with its Instinct and EPYC processors. Analysts had expected data center revenue closer to $5.61 billion, making the segment’s outperformance particularly notable.
Looking ahead, AMD expects second-quarter revenue of approximately $11.2 billion, plus or minus $300 million. That forecast is ahead of analyst expectations of about $10.52 billion. At the midpoint of guidance, the company is projecting YoY revenue growth of about 46%, illustrating more strength in demand.
What Do Analysts Say About AMD Stock?
Of the 45 analysts covering AMD stock, 35 have a “Strong Buy” rating, two have a “Moderate Buy” rating, and eight have a “Hold” rating, making for a consensus “Strong Buy” rating. The mean target price of $475.52 implies a potential downside of 8% from current levels. Meanwhile, the high price target of $665 implies as much as 28% possible growth from here.
Strong demand for AI accelerators, expanding data center revenue, bullish analyst sentiment, and now the strategic acquisition of MEXT all point to a company that is positioning itself to capture an even larger share of the AI infrastructure market. AMD is not just benefiting from the AI boom—it is actively addressing one of the industry's greatest challenges—memory. If MEXT's technology can help customers overcome memory bottlenecks while reducing costs, it could become a meaningful competitive advantage for AMD.
In addition, with earnings momentum remaining strong and AI spending showing no real signs of slowing down, AMD stock could easily test higher highs.
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On the date of publication, Ian Cooper did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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