Analysts from Goldman Sachs highlighted sustained growth in AI infrastructure spending across industries as a key factor in the firm's Buy rating on Advanced Micro Devices, Inc. AMD in a note released Monday.
The Details: Goldman Sachs analyst Toshiya Hari maintained a Buy rating and $175 price target on AMD shares and pointed to increased capital spending from large enterprises as they engage in an "AI arms race."
He noted AMD also raised its long-term AI accelerator market forecast to $500 billion by 2028, up from its prior forecast of $400 billion by 2027.
AMD Pipeline: The analyst said AMD’s product pipeline shows promise with upcoming GPUs that are competitive with Nvidia's offerings. During AMD's Advancing AI event, CEO Lisa Su said the MI325X product is on par with Nvidia's H200 in Training and 1.4 times more performant in Infercing.
Hari also expects investors to closely monitor the acquisition of ZT Systems as AMD has said the integration will allow the company to offer system-level solutions on an accelerated timeline. The deal is expected to close in the first half of 2025.
Server CPUs: Following a downturn in the server market, demand for traditional Server CPUs is rebounding. While growth may be slower compared to GPUs, Goldman Sachs sees AMD as poised to benefit from the cyclical recovery.
Hari also expects AMD to continue to gain market share in the Server CPU market, driven in part by its SKU's that specifically target the Enterprise market.
"Not only will this drive revenue outgrowth at AMD, but also an improvement in gross margin as Enterprise deals tend to be margin-accretive vis-a-vis those with Tier-1 hyperscale customers," the analyst wrote.
AMD Q3: AMD is set to release its third-quarter financial results on Oct. 29 after the closing bell. According to data from Benzinga Pro, analysts expect the company to report earnings of 92 cents per share and quarterly revenue of $6.708 billion.
Price Action: According to Benzinga Pro, Advanced Micro Devices shares are up 0.4% at $156.59 at the time of publication Monday.
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