Why this AMD bull is keeping the faith in the face of the stock's weakness

By Emily Bary

AMD's stock is off 19% over the past month and the biggest decliner in the PHLX Semiconductor Index over that span

Following a weak recent stretch for Advanced Micro Devices Inc. shares, one bull says the chip company's trajectory still looks promising.

"We remain confident around management's ability to execute on its stated goals for MI300 targets for this year and 2025," Piper Sandler analyst Harsh Kumar wrote Friday, referring to AMD's data-center chip for artificial-intelligence applications.

His report came after AMD shares (AMD) suffered their worst single-day percentage drop in 11 months on Thursday, as the broad market saw losses accelerate late in that session upon geopolitical and interest-rate concerns.

AMD shares have been weak over the past month, falling 19.2%. That makes the stock the second worst performer in the Nasdaq 100 over that period, with only Lululemon Athletica Inc. shares (LULU) suffering worse losses, down 19.8%. The stock has been the biggest laggard in the Technology Select Sector SPDR Fund XLK and the PHLX Semiconductor Index SOX over the past month.

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There's been some concern about AMD's competitive positioning going forward, especially after rival Nvidia Corp. (NVDA) announced its new Blackwell chip lineup in mid-March and suggested it would price those products perhaps more affordably than Wall Street initially thought in a bid to expand its market.

But Kumar was upbeat about the price-to-performance ratio for AMD's MI300 chip, which is helping the product get traction for inference use cases. Inference is a hot area of AI that occurs when systems make predictions based on new data.

"In particular, latency relating to memory performance is paramount for these applications, and we feel MI300 is configured to address these issues," Kumar added.

Additionally, he said the company will continue to win market share in servers this year. "We note that many of the hyperscalers still need traditional server architecture, and this has been supported by public statements from the likes of Meta and Dell," Kumar said. In his view, AMD is "the incumbent on the cloud side for CPU servers," referring to central processing units.

He has an overweight rating and $195 price target on AMD's stock, which is up fractionally in Friday's premarket trading.

See also: Intel foundry losses expected to peak this year after hitting $7 billion in 2023

-Emily Bary

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04-05-24 0920ET

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