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Northland has reiterated an Outperform rating and a $175.00 price target on shares of AMD (NASDAQ: AMD), following the company's AI event.
AMD showcased its market share momentum in the server CPU market and its developments in the opensource ecosystem. The company also shared its roadmap for AI accelerators, reinforcing Northland's view of AMD's growing presence in cloud and enterprise data centers.
AMD's AI event highlighted its expectations for the AI market, projecting growth from $45 billion in calendar year 2023 to $500 billion by calendar year 2028. Although Northland considers this estimate to be on the higher side, they anticipate the AI accelerator market could reach between $350 billion and $400 billion by 2028. AMD's market share in AI accelerators has increased from less than 0.1% in 2023 to 5% in 2024.
The company's performance, improvements in its software stack, product roadmap, and customer partnerships contribute to Northland's forecast that AMD could capture over 20% of the AI accelerator market by 2028.
This would translate to AI accelerator revenues of $70 billion to $80 billion. If AMD's other business segments remain constant, total revenue in 2028 could be between $91 billion and $101 billion, indicating a compound annual growth rate (CAGR) of approximately 39%.
Northland's analysis suggests that if AMD achieves a midpoint revenue of $96 billion in 2028 with a 60% gross margin and operating expenses (OPEX) growing at half the rate of revenue, the company could earn roughly $24 per share. This projection underscores the firm's confidence in AMD's growth trajectory in the AI sector over the next several years.
In other recent news, Advanced Micro Devices (NASDAQ:AMD) continues to make significant strides in the artificial intelligence (AI) and high-performance computing sector. AMD's Q2 revenues surpassed Street consensus, reaching $5.835 billion, with its data center segment showing record revenue growth of 115% to $2.8 billion. The company recently launched its 5th Gen AMD EPYC server CPUs, AMD Instinct MI325X accelerators, and third-generation Ryzen AI PRO 300 Series mobile processors, all aimed at boosting AI performance.
Cantor Fitzgerald, Stifel, Roth/MKM, Truist Securities, and Citi reiterated their respective Overweight, Buy, Buy, Hold, and Buy ratings on AMD, reflecting confidence in the company's strategic initiatives and market position. These firms' analyses suggest that AMD is well-positioned to capitalize on the growing AI market and leverage its product strengths.
AMD's strategic collaboration with Oracle (NYSE:ORCL) Cloud Infrastructure, powering its new AI supercluster with AMD's Instinct MI300X accelerators, further highlights the company's expanding presence in the cloud computing sector. In addition, AMD has unveiled networking components, the AMD Pensando Salina DPU and Pollara 400 NIC (NASDAQ:EGOV), expected to be available in the first half of 2025.
InvestingPro Insights
Recent data from InvestingPro adds depth to Northland's optimistic outlook on AMD. The company's market capitalization stands at an impressive $265.72 billion, reflecting investor confidence in its growth potential. AMD's revenue for the last twelve months as of Q2 2024 reached $23.28 billion, with a notable revenue growth of 8.88% in Q2 2024 alone. This aligns with Northland's projections of AMD's expanding market presence.
InvestingPro Tips highlight AMD's strong position in the semiconductor industry. The company is expected to see net income growth this year, and analysts predict profitability for the current fiscal year. These factors support Northland's positive stance on AMD's future earnings potential in the AI accelerator market.
It's worth noting that AMD's stock has shown a high return over the last year, with a 51.58% price total return. This performance underscores the market's recognition of AMD's strategic moves in the AI space, as discussed in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for AMD, providing a deeper understanding of the company's financial health and market position.
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