AMD Stock Surges as Wall Street Weighs Its Odds Against Nvidia

Advanced Micro Devices is launching chips that it expects to be more competitive with Nvidia’s for AI workloads. (Photograph by Ashley Pon/Bloomberg)

Key Points

• Advanced Micro Devices offered a forecast pointing to a potential $1 trillion data-center market by 2030, up from a previous $500 billion forecast for 2028.
• Analysts are divided on AMD’s ability to challenge Nvidia in the AI chip market, where AMD holds a single-digit share compared to Nvidia’s at least 80%.
• Some analysts warn that the AI investment boom may be unsustainable.

Wall Street analysts are applauding new long-term growth targets rolled out by Advanced Micro Devices , but remain divided on how much of a challenge it can pose to Nvidia , the leader in artificial-intelligence chips.

AMD was up 6% at $251.77 in early trading after offering a new forecast for revenue and margins for the next three to five years. The figures point to a potential data-center market opportunity of $1 trillion in 2030, compared with a previous forecast of $500 billion in 2028.

For some analysts, that is more than enough to believe that AMD can make strides against Nvidia, as it has with Intel . The logic is that big technology companies are likely to want to diversify their sources of chips, creating an opportunity.

“We believe AMD’s current AI position versus Nvidia is very analogous to its earlier competition with the previously dominant CPU supplier, Intel, where AMD steadily and methodically chipped away at Intel’s market share through many years of increasingly competitive designs and a consistently aggressive development roadmap,” wrote Benchmark Research analyst Cody Acree in a research note.

Acree has a Buy rating and $325 target price on AMD stock.

However, others are skeptical. While AMD got a couple of high-profile chip-deployment wins with ChatGPT developer OpenAI and cloud-computing company Oracle last month, it is still believed to have only a single-digit share of the AI processor market. Nvidia has at least 80%, analysts believe.

AMD still needs a few big deals to move toward its ambition of a double-digit share of the AI data-center market. Amazon.com has been mentioned as a potential client by multiple analysts.

“[AMD’s] well attended event highlighted the progress of AMD’s technology road map and discussed recent partnerships including OpenAI and Oracle but, importantly, did not announce any incremental customer wins,” wrote Oppenheimer analyst Rick Schafer in a research note. He kept a Perform rating on the stock.

Staying at No. 2 in the AI chip race would hardly be a disaster for AMD, but a slowdown in that spending could be a problem. Few Wall Street analysts have forecast a quick end to the investment wave, but some are warning that current assumptions of spending will prove to be unsustainable.

“We believe AMD’s revenue growth target of 35% CAGR [compound annual growth rate] could be exceeded driven by increases in AI budget. However, we believe the AI bubble will likely burst within a couple years and could result in much lower estimates,” wrote Citi analysts, who kept a Neutral rating and $260 target price.

Write to Adam Clark at adam.clark@barrons.com