5. Advanced Micro Devices Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 108
Oppenheimer expects strong Q3 results from Advanced Micro Devices Inc. (NASDAQ:AMD) but remains cautious on the stock amid soft PC market and rising competition from Nvidia and Intel.
The firm projects data center revenue to rise by 21% quarter over quarter in Q3 and 114% year over year, according to its model.
“Management has impressively grown AMD’s AI franchise from nil to ~$4B over just the past year,” said Oppenheimer analysts, led by Rick Schafer. “Unfortunately, investor expectations have consistently remained out of reach. Initial expectations for ~$8B MI300 sales earlier this year are now closer to $5B, based on our discussions.”
Oppenheimer holds a Perform rating on Advanced Micro Devices Inc. (NASDAQ:AMD). “We remain cautious about AMD’s ability to deliver a profitable long-term business model as the second horse in the secularly declining PC market,” Schafer added. “We see financially and technologically stronger Nvidia (NVDA) and market leader Intel (INTC) solidifying their positions in both CPU and GPU, challenging AMD’s revenue and gross margin trajectory.”
Advanced Micro Devices, Inc. (NASDAQ:AMD) shares recently fell after its latest event.
One of the reasons why the stock fell was that the company did not update its $4.5 billion AI revenue forecast or its outlook through 2025, leaving investors disappointed. Analysts are now looking to Advanced Micro Devices, Inc. (NASDAQ:AMD)’s Q3 earnings release, where they expect clearer guidance and more confidence in the company’s projections.
At the event, Advanced Micro Devices, Inc. (NASDAQ:AMD) showcased several new products, including the Turin EPYC data center CPUs and the Instinct MI325x AI accelerator. The company also introduced the Ryzen AI PRO 300 Series, the first enterprise laptops integrated with Microsoft’s Copilot.
Additionally, Advanced Micro Devices, Inc. (NASDAQ:AMD) reaffirmed its two-year AI chip development roadmap, with the MI325x slated for 2024, the MI350 expected in late 2025, and the MI400 set for 2026. Dr. Su highlighted that the data center AI accelerator market is forecasted to grow from $45 billion in 2023 to $500 billion by 2028.
While Advanced Micro Devices, Inc. (NASDAQ:AMD) increased its total addressable market projection through 2028, investors are eager to see what this means for the company’s near-term performance. Advanced Micro Devices, Inc. (NASDAQ:AMD) claimed the MI325x outperforms Nvidia’s H200 HGX in several areas. However, with Nvidia’s upcoming Blackwell GPUs on the horizon, it remains to be seen how AMD’s products will stack up. Both companies plan to offer annual performance and memory upgrades for generative AI, with Nvidia also shortening its product release cycle.
However, Citi analysts reaffirmed their Buy rating and $210 price target for AMD following the event, noting Advanced Micro Devices, Inc. (NASDAQ:AMD)’s expanded total addressable market. However, they cautioned that margins could take a hit in the short term due to the MI300. Still, they highlighted AMD’s advantages over Nvidia, such as increased memory, lower prices, and an open ecosystem.
Jefferies analyst Blayne Curtis also maintained his Buy rating, though he pointed out the event focused more on product launches than providing detailed roadmaps. The key question remains how much of the $500 billion opportunity Advanced Micro Devices, Inc. (NASDAQ:AMD) will capture.
Oppenheimer analysts were less enthusiastic, describing the event as “largely uneventful” and said Advanced Micro Devices, Inc. (NASDAQ:AMD)’s management reiterated familiar CPU and GPU roadmaps. While AMD has generated $4 billion in AI revenue over the last year through its MI Instinct products, the firm’s performance continues to fall short of expectations, leading them to retain their Perform rating.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock’s strong performance. Despite the stock’s underperformance during the quarter, the company’s AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company’s new AI product launch.”
