Advanced Micro Devices (AMD) stock has risen by an impressive 109%, as the chip giant is experiencing robust demand for its server CPUs (central processing units) and GPUs (graphics processing units) amid the ongoing artificial intelligence (AI) wave. On Wednesday, top Bank of America analyst Vivek Arya reiterated a Buy rating on AMD and increased his price target to $500 from $450. The analyst also raised his price targets for other AI chip stocks and called AMD, Nvidia (NVDA), Broadcom (AVGO), Micron (MU), and Marvell (MRVL) his top picks amid continued demand strength.
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Forget margin or options. Here's how the pros trade NVDACiting a stronger AI infrastructure capex outlook, Arya raised his 2030 total addressable market (TAM) for AI data center systems to about $1.7 trillion, up from his previous estimate of $1.4 trillion. Within this TAM, Arya raised his AI accelerator outlook to about $1.2 trillion from $1.0 trillion on increased hyperscaler custom ASIC shipments (such as Google (GOOGL) tensor processing units or TPUs and Amazon’s (AMZN) Trainium chips), data center server CPU forecast to about $110 billion from about $80 billion, and AI networking outlook to about $316 billion from $240 billion on ongoing optics/switch expansion.
“While the current supply chain bottlenecks could limit shipment of leading-edge components, we believe key AI compute, networking, and memory vendors that have planned properly should continue to deliver and outperform,” said Arya.
BofA Analyst Is Bullish on AMD’s Growth Potential
Arya explained that he sees AMD as one of his top picks due to several catalysts, including CPU strength, the July analyst day event, and the potential for additional GW (gigawatt) deals without any warrants.
The 5-star analyst highlighted that his new price target for AMD stock is based on a P/E multiple of 42x his 2027 non-GAAP EPS (earnings per share) estimate (up from the previous multiple of 38x) and is toward the middle-to-upper end of the historical range of 13x to 58x.
He added that the new price target is backed by AMD’s more than 50% annual EPS CAGR (compound annual growth rate) potential and its ability to secure AI CPU and GPU share gains. These positives are modestly offset by slower growth in cyclical PC, embedded, and console markets.
Arya ranks no. 81 among more than 12,200 analysts tracked by TipRanks. He has a success rate of 65%, with an average return per rating of 28.8% over a one-year period.
Is AMD Stock a Good Buy?
AMD recently reported impressive first-quarter results and issued solid Q2 guidance, driven by strength in its data center business. Wall Street has a Strong Buy consensus rating on Advanced Micro Devices stock based on 27 Buys and eight Holds. The average AMD stock price target of $449.21 indicates that shares are fully priced at current levels.
