AMD stock is set for a 38% surge as per Wall Street analyst Frank Lee, who sees potential in AMD’s capacity to cater to the increasing AI chip demand.
AMD stock has taken a 28% tumble since reaching its peak of $227.30 just last month. This downward trend aligns with the broader weakness observed in major market indexes. However, analyst Frank Lee at HSBC remains bullish on AMD’s prospects, believing the stock could rebound to its previous highs.
Lee has shifted his stance on AMD stock from Hold to Buy. He has also increased his price target from $180 to $225, indicating a potential upside of 38% from the current share price of about $163.
Lee’s bullish outlook for AMD is based on the company’s opportunity to cater to the increasing demand for chips essential for artificial intelligence (AI).
Why Buy AMD Stock
With the launch of the MI300 chip in December, AMD aims to tap into the growing market for AI GPUs. Initially estimated to generate over $2 billion in data center GPU revenue this year, AMD has revised its forecast to more than $3.5 billion based on strong early interest in the MI300 from customers.
Nvidia has held a commanding position in this market, with its H100 GPU being the preferred choice for major cloud services providers like Microsoft Azure and Amazon Web Services. However, the recent decline in AMD’s stock price suggests a degree of doubt regarding its ability to challenge its larger competitor.
Nonetheless, Lee holds a contrasting view and argues that AMD’s current lower share price has reset growth expectations, presenting an opportunity for a potential rebound. He forecasts a surge in demand that could propel AMD’s AI revenue beyond the management’s forecast.
AMD stock is trading at a lofty forward price-to-earnings ratio of 45, requiring the chipmaker to demonstrate escalating growth to validate its high-end valuation. In light of this, AMD forecasts rapid expansion in its AI chip business in the coming years, promising a surge in earnings growth.
If AMD reports better-than-expected sales for the MI300 this year, it could propel the stock toward Lee’s price target in the near term.
Advanced Micro Devices (NASDAQ: AMD) Stock Performance
At the time of publication, AMD stock is trading at $155.08, showing a 0.69% increase compared to the previous trading session. Traders have exchanged 52,504,046 (52.50 million) shares, which is lower than the average daily trading volume of 75.69 million.
