Source: Davit Kirakosyan
Northland’s Outperform Rating on AMD
Northland analysts have reaffirmed an Outperform rating on Advanced Micro Devices, Inc. (AMD), indicating strong confidence in the company’s future performance. The analysts have also set a bullish price target of $175 for the tech company’s shares, suggesting significant upside potential from its current trading level.
The Outperform rating is primarily based on AMD’s robust position in three key markets: artificial intelligence (AI) graphics processing units (GPUs), server central processing units (CPUs), and the personal computer (PC) client segment. Furthermore, the easing of headwinds in the embedded and gaming segments, which had been challenging areas for the company, is also expected to contribute to AMD’s growth trajectory towards 2025.
AMD’s Strong Position in AI Market
AMD’s competitive roadmap, coupled with a superior total cost of ownership (TCO), has propelled its significant gains in the AI market. The company’s AI-related revenue is projected to surge to $9.5 billion in 2025, up from $5.2 billion, reflecting a promising 7% increase in the first half of the year compared to the second half of 2024.
One of the key factors driving this growth is the ramp-up of AMD’s MI325X chip. The new chip is expected to be a game-changer, providing hardware performance on par with NVIDIA’s H200, one of the top competitors in the market. Although software development remains a challenge, AMD’s hardware advancements and strategic focus on AI put it in a robust position for growth, according to the Northland analysts.
AMD Outpaces Intel in Server Market
In the server market, AMD continues to outpace its long-standing rival, Intel. Early indications show that AMD’s Turin CPUs outperform Intel’s Granite Rapids in most workloads. This competitive advantage is expected to drive AMD’s non-AI data center revenue growth by 26% year-over-year in 2024, reaching $7.7 billion. Furthermore, an additional 10% growth is projected for 2025. Importantly, these estimates are viewed as conservative, suggesting there could be more substantial gains on the horizon.
PC Client Segment Growth
The PC client segment is another area where AMD is poised for significant growth. With Microsoft ending support for Windows 10, an estimated 1.2 billion systems worldwide will require upgrades. AMD is well-positioned to capitalize on this opportunity, with approximately 40% of these systems, or 480 million units, expected to be replaced over the next 18 months.
Despite elevated channel inventory levels in the PC market overall, AMD’s inventory levels remain healthy. This is an indication of robust demand for the company’s products, even amidst market challenges.
AMD’s Future Outlook
With a strong leadership position across key markets, an innovative product pipeline, and favorable industry tailwinds, AMD is well-positioned for substantial upside. These factors, combined with the company’s solid financial performance and strategic initiatives, make it a top pick for 2025, according to Northland.
The bullish outlook on AMD underscores the company’s resilience and adaptability in a rapidly evolving tech landscape. By leveraging its strengths and focusing on innovation, AMD is well-poised to maintain its growth momentum and continue delivering value to its shareholders.