AI Chip Stocks Nvidia, AMD Rebound: What's Driving The Reversal?

Artificial intelligence chip stocks led by Nvidia Corp NVDA, Advanced Micro Devices, Inc AMD, Broadcom Inc AVGO, and Qualcomm Inc QCOM are seeing redemption Friday after two days of selloff amid growing geopolitical tensions and dismal Big Tech earnings.

Meanwhile, on Thursday, Nvidia supplier SK Hynix reported record-high quarterly profit and revenue this week, thanks to the chip AI frenzy.

Another tailwind for the sector is China’s subsidies for new energy vehicles and consumer electronics, which also depend on AI chips.

Also Read: Amazon Tests AI Chips in Texas Lab, Aims to Cut Nvidia Costs

Susquehanna analyst Christopher Rolland maintained a Positive rating on AMD with a price target of $200 on Thursday.

Rolland expects generally in-line guidance driven by potential MI300, Server, and PC upside, perhaps offset by weakness in XLNX/Gaming.

The analyst reluctantly expects an additional $500 million raise, on the path to $5 billion for MI300 revenue in 2024. Rolland’s recent server checks support a more decisive second half for the Data Center CPU.

The analyst noted that AMD has likely gained server CPU revenue share by accelerating enterprise adoption. Genoa and Turin should also provide an ASP uplift later this year.

For Client, Rolland noted positive checks as second-quarter notebook ODM builds and PC sell-through were better than expected.

The analyst’s second-quarter PC-SIGnals data also suggests AMD gained a share. These share gains could continue as Intel Corp INTC is dealing with a slower-than-expected MTL ramp, and Lunar Lake could miss PC shipments in time for the back-to-school season.

Additionally, the instability issues with Intel’s Raptor CPUs could sway customer decisions, potentially to AMD’s benefit.

For Gaming, Rolland noted weaker console sell-through. Graphics card sell-through remains muted. PC-SIGnals data suggests AMD lost modest GPU share, and AMD GPU pricing declined sequentially, netting perhaps a weaker-than-expected outlook. Rolland expects generally in-line gross margins.

Investors can gain exposure to the semiconductor sector through Vanguard S&P 500 ETF VOO and Invesco QQQ Trust, Series 1 QQQ.

Price Actions: NVDA shares are up 0.90% at $113.29 at the last check on Friday. AMD is up 0.82% at $139.45.

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