Advanced Micro Devices (NASDAQ: AMD) has seen a notable correction in its stock price recently, experiencing a decline of 27% since reaching its peak in early March. However, amidst this downturn, HSBC analyst Frank Lee highlights a resetting of market expectations for AMD’s MI300 series accelerators’ revenue projections for 2024 and 2025.
Lee indicates that the current outlook is for revenue ranging between $4-5 billion in 2024 and $9-10 billion in 2025. These figures represent a downward adjustment from previous estimates of $6-8 billion and $10-12 billion, respectively. Nonetheless, Lee expresses confidence in AMD’s capacity and demand, suggesting that the company may surpass its guidance for AI GPU revenue of over USD3.5 billion in 2024, potentially even reaching beyond USD5 billion, compared to his estimate of USD6.5 billion.
Despite the adjusted expectations, concerns linger regarding competition from Nvidia and its newly introduced GB200 platform. While Nvidia has already solidified its presence in the AI chip market, Lee believes that AMD’s MI300 is not directly pitted against the GB200 but rather competes with Nvidia’s existing H100/H200 GPUs. Looking ahead, Lee anticipates that Nvidia’s GB200 platform will face off against AMD’s upcoming next-generation AI chip solutions, such as the MI350/MI375/MI400, slated for release in the latter half of 2024.
Lee remains optimistic about AMD’s potential market share in the AI GPU segment, forecasting a 10% market share by 2025 in his base case scenario, which could translate to AI GPU revenue of $12.3 billion. In a more bullish scenario, Lee envisions AMD capturing a 15% market share, potentially yielding AI GPU revenue of $18.5 billion by 2025.
Furthermore, Lee expects enhancements in non-AI segments like client and traditional servers to contribute to AMD’s overall growth trajectory. Consequently, Lee has upgraded his rating on AMD from Hold to Buy and increased his price target from $180 to $225, implying a potential upside of approximately 46%.
With 29 analysts rating AMD shares as Buy and 6 as Hold, a Strong Buy consensus rating is maintained. The average price target stands at $202.32, suggesting a potential premium of 31% from the current trading price.
In summary, Lee’s positive outlook on AMD is underpinned by the company’s prospects for gaining market share in the AI GPU segment and enhancing performance across other business segments, positioning it for sustained growth in the future.