AMD's MI300 Chip Gains Momentum, Analyst Predicts Strong Growth and Server Market Success

Piper Sandler analyst Harsh V. Kumar reiterated an Overweight rating on Advanced Micro Devices, Inc AMD with a price target of $195.

The analyst provided his updated thoughts on AMD, specifically, prospects for the MI300 ramp through the year and commentary around the server business. 

Kumar maintained that the MI300’s price-to-performance ratio is really strong and is gaining traction, specifically around inference applications. Latency relating to memory performance is paramount for these applications, and Kumar deemed the MI300 is configured to address these issues.

Kumar expressed confidence in management’s ability to execute its goals for MI300 targets for this year and 2025. Kumar currently modeled for $4 billion in MI300 revenues for 2024 and $7.6 billion for the 2025 fiscal year.

The analyst noted that server CPU inventories have improved significantly after the downturn and subsequent correction in 2023. 

He said that the segment will grow year-over-year in 2024 despite moves to accelerated computing. 

He noted that AMD has made advances on the CPU side, including the chip architecture and advanced packaging, which allows for Total Cost of Ownership (TCO) advantages.

As per Kumar, AMD is well-positioned for inference applications, given its TCO proposition relative to the current accelerators available from competitors.

Additionally, momentum in server share will likely continue, as he is confident that the segment will grow year over year in 2024. 

Kumar also noted that AMD is the incumbent on the cloud side for CPU servers. 

Finally, the gaming segment is primarily de-risked, and he is looking for a turnaround in the embedded segment starting in the second half. 

Kumar projected Q1 revenue and EPS of $5.41 billion and $0.57.

AMD stock gained 86% in the last 12 months. Investors can gain exposure to AMD via IShares Semiconductor ETF SOXX and Invesco PHLX Semiconductor ETF SOXQ.

Price Action: AMD shares traded higher by 3.37% at $171.40 on the last check Friday.

Photo via Shutterstock