The analyst expects AMD to continue to gain server market share versus Intel.
Advanced Micro Devices, Inc. AMD shares could rebound Thursday, snapping a three-session losing streak. The immediate trigger could be bargain hunting, especially with a positive sell-side price target rerating the stock received on Thursday.
The AMD Analyst: KeyBanc Capital Markets analyst John Vinh maintained an Outperform rating on AMD shares and raised the price target from $140 to $170, suggesting over 25% upside from current levels. The upward adjustment, the analyst said, is based on 44 times KeyBanc’s 2024 earnings estimate.
The AMD Thesis: AMD is positioned well to monetize the “genAI” market, which is estimated at $150 billion in 2027, said Vinh in the note. The ramp-up of the MI300X GPUs will likely help the company, with the new AI chip likely fetching revenue of $2 billion in 2024, he said.
“With higher demand and greater supply, we believe there’s an upward bias to this target,” the analyst said. Long-term, AMD has the potential to take a 10%-15% share in the genAI market, translating to a revenue opportunity of about $20 billion, he added.
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Vinh expects AMD to continue to gain server market share versus Intel, taking its share from high-20% in 2023 to mid-30% in 2024, thanks to product leadership and manufacturing advantages.
“With recovering traditional server demand, inventory digestion at end customers should be largely behind, setting up a solid path for ASP growth as Genoa ramps,” he said.
Additionally, the next-gen EPYC CPUs, expected to launch in the second half of 2024, should help sustain growth in 2024, he added.
AMD’s gross margins will likely improve throughout 2024, given the PC digestion cycle is in the rearview now, the analyst said. Margin expansion will also be supported by an expected recovery embedded in the second half and new product ramps in server/GPUs and PCs, he said.
Price Action: In premarket on Thursday, AMD shares rose 0.88% to $136.38, according to Benzinga Pro data.