2 Reasons AMD Stock Is Rising Today

AMD and IBM announced plans to develop new computing architectures. Above, AMD CEO Lisa Su. (AFP via Getty Images)

Shares of Advanced Micro Devices rallied on a double dose of good news Tuesday.

The chip maker unveiled a “quantum-centric supercomputing” partnership with International Business Machines and the stock received an upgrade from a Wall Street firm. The call was based on the idea that AMD is gaining ground as a rival to Nvidia in semiconductors used for artificial intelligence.

AMD and IBM announced plans to develop new computing architectures based on a combination of IBM quantum computers and AMD technology such as central processing units and graphics processing units, or CPUs and GPUs. The companies didn’t announce any new products.

“Together, these technologies could tackle real-world problems at unprecedented speed and scale,” the companies said in a joint press release. The pair are planning an initial demonstration of the integration later in the year.

AMD stock was up 1.4% to $165.58 in midday trading. Shares of IBM rose 0.7% to $241.17.

Separately, William Stein of Truist Securities upgraded AMD to Buy from Hold and lifted his target for the price to $213 from $173. AMD is attracting more AI customers and can claim a share of the lucrative market for GPUs for use in data centers, Stein argued.

For nearly half a decade, Truist had believed that Nvidia was so far ahead in the data-center semiconductor race that a second supplier wouldn’t be able to secure its own share of the market. Hyperscaler customers were using AMD’s technology only as a “price check” on Nvidia products, the firm’s industry contacts told Truist.

“Over the last month or so, contacts have increasingly noted that hyperscalers are working with AMD in a partnership manner, expressing true interest in deploying AMD at scale,” Stein wrote. “This change in messaging from the field is the basis of our upgrade.”

AMD’s success in gaining share in the CPU market is a model for its GPU business. The company controlled less than 1% of the CPU market in 2018, but after releasing its Rome product in 2019, that share has grown to around 21% today.

It helped that CPU leader Intel had manufacturing mishaps during this time, Stein said. Nvidia, he argued, is unlikely to make the same missteps, but AMD’s new MI355 AI chips could still be the Rome of data-center GPUs.

Truist previously believed AMD would have almost zero long-term market share in data-center GPU sales. The firm now expects AMD to establish a share of 10% over time, though it isn’t possible to know the exact number and timeframe, Stein acknowledged.

Nvidia stock was up 0.7% ahead of its second-quarter earnings report on Wednesday. Fellow chip maker Broadcom gained 1.3%.

Write to Nate Wolf at nate.wolf@barrons.com