Citi upgraded AMD to ‘Buy’ and lifted its price target, stating that investors should also be looking at the company’s graphics processing unit’s potential.
- Citi estimates investors are assigning only a 60% probability that AMD will exceed $50 billion in GPU revenue by 2028.
- Citi views AMD as a credible alternative supplier in the GPU market and expects the company to benefit from demand from Meta Platforms.
- AMD and Meta announced a 6-GW AI infrastructure partnership earlier this year that includes a custom AMD Instinct GPU based on the MI450 architecture.
Shares of Advanced Micro Devices (AMD) ended Friday’s session 4.73% higher after a Citi analyst upgraded the stock to “Buy” from “Neutral.” The analyst said investors should pay closer attention to the company’s graphics processing unit (GPU) potential.
Earlier in the session, AMD shares had climbed more than 6% before giving up some of those gains. At the time of writing, the stock had extended its gains in after-hours trading and was up 0.2%.
Citi Says AMD’s GPU Business Deserves More Attention
Citi analyst Atif Malik raised his price target on AMD to $575 from $460, implying more than 11% upside from the stock’s last traded price.
The analyst’s bullish view is based on AMD’s GPU business as the company competes with Nvidia in the AI chip market. He believes investors still see AMD mainly as a CPU company and are not fully accounting for its GPU sales potential, according to a report in Barron’s.
Malik estimates the market is assigning only about a 60% chance that AMD will generate more than $50 billion in GPU revenue by 2028. He believes AMD could sell more GPUs than investors expect, particularly to major customers such as Meta Platforms (META).
Meta Demand Could Be A Key Growth Driver
In a research note, Citi said AMD is emerging as a credible second supplier in the GPU market and is well positioned to win a large share of Meta’s business. The firm added that AMD’s stock could have further upside if investors begin placing greater value on its growing GPU business.
In February, Meta and AMD announced a 6-GW AI infrastructure partnership that includes a custom AMD Instinct GPU based on the MI450 architecture.
In a research note, Citi described AMD as “emerging as a legit second source” in the GPU market and said the company is well positioned to capture the “lion’s share” of Meta’s demand, according to the Barron’s report. The firm added that AMD’s perception as a CPU-focused stock creates room for further upside if investors begin to assign greater value to its expanding GPU business.
The Citi upgrade came a day after Bank of America raised its price target on AMD to $560 from $500. The firm also increased its estimate for the server CPU market to more than $170 billion by 2030, up from $125 billion, citing expectations for rapid growth over the next five years, according to TheFly.
AMD Stock: Retail Stance
On Stocktwits, retail sentiment around AMD stock was ‘neutral,’ while message volume was ‘normal’ at the time of writing.
In the past 12 months, AMD stock has surged 330%.
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