It has been a whirlwind few days for Advanced Micro Devices (NASDAQ:AMD), which has been on quite a heater during the past six months. The most recent bump came this week following the announcement of a partnership with OpenAI, and AMD’s share price has soared by over 40% in the days since the news broke.
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Under the terms of the arrangement, the two companies are entering into a strategic partnership to deploy six gigawatts of AMD GPUs. AMD touted the deal as an opportunity to enable “very large-scale AI deployments” in the years ahead using multiple generations of its products.
OpenAI has also received warrants for up to 160 million shares of AMD’s common stock as part of the partnership, further aligning the interests of the two major tech companies.
With AMD’s share price up more than 140% during the past half year, is now the time to take profits? Investor Kenio Fontes thought about doing so for a minute, but ultimately concluded that there is more room for growth up ahead.
“The deal with OpenAI should unlock a lot of value for AMD,” says Fontes, who believes that there is even “the potential to surprise if the execution is done well.”
For one thing, the investor notes that six gigawatts is a substantial number. In fact, Fontes calculates that this deal could bring in some $20 billion in revenue for AMD on average between 2026 and 2031.
This has caused the investor to revisit his previous revenue assumptions for AMD. While he had earlier predicted $42 billion in revenues for 2027, Fontes now thinks that $50 to $60 billion in sales appears quite realistic.
In addition to direct dollar signs, the partnership with OpenAI gives AMD additional credibility in the market. That’s not a trivial matter.
AMD “has the endorsement of this player, showing that its technology is not that inferior to Nvidia,” adds Fontes.
Still, Fontes does offer a word of caution, noting that the pathway forward is not free of obstacles.
“There are uncertainties related to execution, dilution, competition, and market growth that could affect this potential, and these risks should be closely monitored,” sums up the investor, who nevertheless assigns AMD a Buy rating. (To watch Kenio Fontes’ track record, click here)
That seems to track with Wall Street’s take at this point as well. With 26 Buys and 10 Holds, AMD enjoys a Moderate Buy consensus rating. Its 12-month average price target of $236.18 implies minimal movement up ahead. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.