AMD's Stock Has Been on a Tear Recently - and Why It Can Keep It Up

Shares of Advanced Micro Devices Inc. (AMD) have surged recently, climbing 28% from their March lows, and Melius Research analyst Ben Reitzes believes there is potential for further gains.

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Reitzes began by analyzing the factors behind the recent rally. With AMD shares up 7% this week alone, there is evident enthusiasm surrounding Taiwan Semiconductor Manufacturing Co. Ltd.’s positive results, indicating a healthy chip sector.

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Additionally, Reitzes identified positive signs in the personal-computer market and manageable expectations for AMD in the realm of artificial intelligence (AI) chips.

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In the PC market, Reitzes observed sequential growth in AMD’s PC central processing units (CPUs) during the second quarter. He attributed this growth to overall industry expansion, partly due to delays in the launch of a rival chip designed by Intel Corp. Reitzes expects continued PC market growth into 2025, driven by an aging installed base and increased corporate demand.

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He noted that AI PCs could further boost the market in the latter half of the year if Microsoft Corp. resolves issues with the Recall AI feature on its Copilot+ PCs.

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Regarding AI server chips, Reitzes acknowledged some investor concerns about AMD’s competitive stance against Nvidia Corp. and the purchasing pace of major buyers like Microsoft and Meta Platforms Inc. However, he suggested that these worries might be exaggerated now that expectations have been tempered. Reitzes anticipates the market will shift focus to 2025 figures within six months, predicting substantial growth from the previous year.

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Reitzes also praised AMD’s recent acquisition of Silo AI. While he acknowledged that this acquisition wouldn’t elevate AMD to Nvidia’s level, he emphasized that it would enhance AMD’s ecosystem and contribute to incremental business growth.

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Reitzes set a target price of $210 for AMD shares, implying a 14% upside from current levels. He noted that this target could be conservative, given the potential for momentum in the second half of the year and changing perceptions heading into 2025.

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