AMD stock saw a 5% jump on Friday, outpacing the rest of the semiconductor industry. The market turned its focus back to AMD following a report by New Street Research analyst Pierre Ferragu that suggested that the potential for share price growth in AMD was much higher compared to its competitor, Nvidia. With the Unemployment Rate in the US rising to 4.1%, the market is anticipating Fed rate cuts, leading to a boost in US indices such as the S&P 500 and NASDAQ.
Ferragu has shifted his rating on Nvidia to Neutral from Buy, indicating that he believes the current price already reflects the company’s success in the AI market. Instead, he suggests focusing on better-priced industry stalwarts like AMD and Taiwan Semiconductor. Ferragu has set a price target of $235 for AMD within the next 12 months and predicts a target of $345 by the end of 2026, based on the expectation that AMD will generate $10 in earnings per share by 2027.
Despite underperformance in its AI chip business, AMD continues to gain market share in the CPU market for PCs. With the upcoming release of its Ryzen AI 300 processors, designed to improve AI workloads, AMD has the potential to further challenge Intel for market share. Meanwhile, investors are looking optimistically at the forecasted $4 billion in sales of AMD’s AI-enabled data center GPUs this year.
Artificial intelligence, or AI, is a field that seeks to replicate human cognitive functions in machines. Sub-fields of AI include machine learning, deep learning, natural language processing, and speech recognition, among others. AI applications have a wide range of use cases, from generative AI platforms to probabilistic techniques used in credit rating systems and drug discovery. Companies like Nvidia, Palantir Technologies, and Microsoft are early players in the AI industry, with Nvidia being viewed as a key player in AI-focused computer chips.
Following the introduction of ChatGPT, an AI platform, to the general public in late 2022, stocks associated with AI began to rally. Nvidia saw significant gains following the release, leading to speculation about a potential tech bubble. However, analysts believe that the market is not in a bubble, citing high revenue growth projections. AMD stock has shown positive momentum, breaking above technical resistance levels on the daily chart and potentially moving towards higher resistance levels if the bullish trend continues. Support levels for AMD stock are identified at $162.50 and $150, as well as an ascending trendline from a wedge pattern.
