The soaring trajectory of AMD’s stock price over recent months, with a remarkable 110% surge since October and a notable 39% increase year-to-date, reflects a robust upward trend. This surge mirrors the overall momentum witnessed in semiconductor chip companies, driven largely by the growing influence of artificial intelligence (AI) across various industries.
While some analysts and investors may exercise caution in response to such rapid appreciation, Citi remains notably optimistic about AMD’s prospects. Their bullish stance underscores confidence in the company’s ability to capitalize on emerging opportunities in the semiconductor market and sustain its growth momentum moving forward.
AMD stock rally
The surge in demand for artificial intelligence (AI) has played a pivotal role in driving the rally for AMD, particularly within the data center market where the company has been able to capture market share in recent years. Analysts at Goldman Sachs anticipate a continued emphasis on accelerated compute by large cloud hyperscale customers in 2024, which is expected to benefit AMD and potentially shift market share within the general-purpose compute segment in favor of the company.
While Nvidia has been a frontrunner in the sector, the broader demand for AI chips has bolstered share prices across the board. Despite reporting mixed results and lowering its guidance for the first quarter of 2024 in its recent earnings release, AMD raised its sales expectations for its MI300 product to over $3.5 billion for the year, up from the initial forecast of over $2 billion.
However, analysts at Citi hold even more bullish projections, estimating MI300 sales to surpass $5 billion in 2024 and reach $8 billion in 2025. Despite a slight decline in AMD’s shares following its earnings release on January 30, the stock has demonstrated resilience, surging to over $197 per share and reaching a high of $201.59 as of today.
Citi remains bullish on AMD stock
Citi analysts maintain a “wildly bullish” stance on semiconductor stocks, citing stable demand in PC’s, handsets, and servers, which collectively represent 53% of the semiconductor total addressable market (TAM). They highlight inventory replenishment as a significant factor, noting that semiconductor units experienced a 19% decline in 2023, the most significant drop in over two decades.
Expecting at least 11% year-on-year growth in global semiconductor sales in 2024, Citi recently raised its forecast for semiconductor sales, anticipating further growth throughout the year. They particularly emphasize the importance of the AI market, foreseeing expansion in total addressable market (TAM) driven by increased adoption across various sectors such as government agencies, universities, and large/medium businesses.
In light of these trends, Citi maintains its bullish stance on Nvidia (NVDA), AMD, and Broadcom (AVGO), anticipating positive earnings from AVGO as another catalyst for the sector. While noting that Intel (INTC) and AMD’s combined fourth-quarter 2023 PC business exceeded seasonality, they expect a return to seasonal patterns in the first quarter of 2024.
Regarding the data center end market, Citi acknowledges an ongoing inventory correction and some TAM loss to AI but anticipates that this trend will conclude sometime in the first half of 2024.
Overall, Citi reaffirms its Buy rating on AMD and raises its target price for the stock from $136 to $192 per share, reflecting its optimistic outlook for the semiconductor sector.