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The opportunities for AI are becoming increasingly clear. Advanced Micro Devices (NASDAQ:AMD). This was made clear during the company’s recent earnings call, where it raised its 2024 data center GPU revenue forecast from more than $2 billion to about $3.5 billion.
Northland analyst Gus Richard said the change in forecasts shows the company’s positioning in the space has improved, ranking it in the top 1% or so of Street experts. I am an analyst. “AI revenue is growing faster than expected as customers quickly evaluate AMD’s AI products and AMD is aggressively ramping up its supply chain to meet demand.” said the star analyst.
Richard believes that AMD’s ability to generate AI revenue will be “production limited” in the short term, but he expects the company to gain market share in the AI GPU market at an accelerated pace. Richard says that over time, AMD will “probably capture more than his 20% of the AI GPU market.”
The reason behind these high expectations lies with AMD’s larger rivals. Currently, the AI accelerator market is completely dominated by his Nvidia, which claims to have captured his 70% market share, and its main competitors are those used by hyperscale data center operators. AI ASIC. In a way, Nvidia has created a bit of a problem for itself. Essentially, by introducing GPU as a Service, you are “directly competing” with your cloud service provider’s customers, and in doing so you are “fundamentally changing” your relationship with them.
Additionally, the markup for AI GPUs is 5x to 10x, with H100 products, for example, delivering 80% to 90% gross margins. This is where AMD can step in and make its presence felt. “The arrival of AMD’s MI300 provides a competitive edge through an open source approach and a reliable alternative to challenge NVIDIA’s software dominance,” he explained.
Additionally, Richard predicts that Nvidia will start relying on Intel for some of its advanced packaging needs this year, potentially straining its relationship with TSMC. With Nvidia moving to Intel 18A process by his CY26, TSMC’s interests could more closely align with AMD’s. As a result, Richard believes that his AMD position as a second source will no longer limit him to a 20% market share.
So, while Richard rates AMD stock an Outperform (i.e. Buy), his $195 price target suggests a 13% upside in the stock over the next few months. (Click here to see Richard’s track record)
Most of Richard’s colleagues agree. Based on a mix of 29 Buys to 5 Holds, the stock claims a consensus rating of “Strong Buy.” TheStreet’s average price target of $194.16 is essentially the same as Richard’s target. (look AMD stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
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