Investing.com – Bank of America (BofA) analysts affirmed a Buy rating on AMD (NASDAQ:) stock ahead of its “Advancing AI” event scheduled for October 10.
Analysts highlighted that AMD’s previous AI event on December 6 was followed by big stock gains of 19% and 80% over the following three months, outperforming the index by 10% and 37%.
The upcoming event, where AMD is expected to unveil roadmap updates in AI and server CPU along with cloud customer feedback support, “could re-energize AMD shares,” which have seen a modest year-to-date increase of 9%. , lagging behind SOX stock’s 22% rise.
Although the competitive landscape in AI accelerators is becoming increasingly crowded, Bank of America highlighted the potential for AMD to increase its market share.
Current market consensus estimates that AMD’s AI sales will reach $5.1 billion in 2024, with the potential to double year-over-year sales to $10 billion in 2025.
The current consensus for AMD’s AI sales in 2024-2026, estimated at $5.1 billion, $9.7 billion, and $12.8 billion, suggests that the company’s market share in accelerators will likely remain at around 5-7%, much lower. Of its 20%+ share of the consumer market. CPUs and GPUs for gaming.
While AMD has gotten off to an impressive start, Bank of America warns that expanding its share further could be difficult given NVIDIA Corporation’s (NASDAQ:) dominant market share of 80-85%+ and its strong position in the cloud, along with competition from custom ASICs. Cost-optimized companies like Broadcom (NASDAQ:) and Marvell (NASDAQ:).
However, if AMD can demonstrate a credible path to securing more than 10% AI market share by 2026, it could add nearly $5 billion to its sales, with potential earnings per share (EPS) of around $8 to $9. , compared to consensus. Estimate $7.37.
“Faster growth could also help AMD revalue the 30 to 55 times forward price-to-earnings at which it has been able to trade during previous periods of rapid stock gains and 40%+ annual sales growth,” Bank of America analysts said.
“We expect AMD to emphasize improving its bottom line including recent acquisitions (ZT Systems and Silo AI), open source software (ROCm) and networking (Infinite Fabric),” they added.
Bank of America also reflects broader discussions impacting AMD stock performance, including competition from Intel (NASDAQ:), sluggish PC demand, increased competition from ARM-based servers and PC CPUs, and challenges in raising IQ silicon prices. AI, and the pace of recovery in embedded and non-AI gaming markets. These segments are crucial because they represent 20-25% of AMD’s sales and are considered the most profitable but cyclical.
