Advanced Micro Devices Inc AMD has caught the market’s attention with its latest strategic move—the acquisition of ZT Systems, a privately-held company known for its expertise in compute infrastructure.
As AMD aims to bolster its AI systems capabilities, Wall Street analysts have shared their mixed reactions. Here’s a look at what the experts have to say about this $4.9 billion deal and its implications for AMD's future.
JPMorgan On AMD Stock: Narrowing The Gap With Nvidia
JPMorgan analyst Harlan Sur maintains a Neutral rating on AMD with a price target of $180.
Sur views the acquisition as a positive move for AMD, particularly in enhancing its AI infrastructure. “Overall, we believe this is a step in the right direction for AMD and should help to potentially close the gap between Nvidia Corp NVDA over the next few years,” Sur states.
The acquisition of ZT Systems, a designer and manufacturer of compute infrastructure for hyperscalers and compute OEMs, is expected to synchronize AMD's next-gen GPU introduction timelines with customer compute systems.
Sur highlights that “ZT Systems' strong development team” will allow AMD to “develop innovative networking / connectivity solutions (UALink/Infinity fabric switching solutions) over copper/optical to potentially further lower power consumption/boost performance in its next generation racks scale reference platforms.”
Oppenheimer On AMD Stock: Cautious Optimism Amid Competition
Oppenheimer analyst Rick Schafer holds a Perform rating on AMD, without providing a specific price target.
Schafer recognizes the strategic intent behind the acquisition but remains cautious. “We acknowledge AMD’s measured approach to filling AI platform ‘holes’ but see a long road ahead against entrenched AI 800lb gorilla NVDA,” Schafer said.
The $4.9 billion acquisition, split 75/25 between cash and stock, is expected to close in the first half of 2025. Schafer notes that “ZT complements AMD's silicon/software with systems-level solutions” and that management expects the deal to be “dilutive to 2025 EPS but expects to exit the year accretive.”
Despite this, Schafer remains concerned about AMD’s position relative to its competitors, stating, “We remain cautious toward AMD’s ability to deliver a profitable long-term business model as the second horse in the secularly declining PC market.”
Stifel On AMD Stock: Long-Term Growth Potential
Stifel analyst Ruben Roy rates AMD as a Buy with a price target of $200.
Roy is optimistic about the acquisition, noting that it “adds AI systems expertise to AMD's compute silicon and growing software portfolio with the addition of 1,000 engineers.”
Roy views the acquisition as a logical next step for AMD in its efforts to expand AI capabilities and accelerate adoption of rack-scale systems with cloud service providers. He acknowledges the challenges ahead, particularly in relation to Nvidia, but believes that AMD is well-positioned to continue its momentum in data center and enterprise markets.
Roy concludes, “Despite near-term demand volatility, we expect share gains to drive growth well above market, and we expect gross and operating margin expansion to continue.”
Truist Securities On AMD Stock: Filling The Gaps But Not Catching Up
Truist Securities analyst William Stein reiterates a Hold rating on AMD, with an unchanged price target of $156.
Stein sees the acquisition of ZT Systems as a move to “plug a hole” in AMD's offerings, but cautions that it “doesn’t level the playing field with NVDA.”
Stein notes that while the acquisition provides AMD with a path to delivering system-level designs similar to Nvidia’s capabilities, the latter's advantage in software remains significant. “We note AMD’s progress in DC/AI, especially compared to Intel (INTC, Hold), but continue to favor NVDA over the others in this DC/AI cohort,” Stein explains.
AMD's acquisition of ZT Systems has sparked a range of opinions among analysts, reflecting both optimism and caution. While the deal could help AMD make strides in the AI and compute infrastructure space, the company still faces significant challenges in outpacing competitors like Nvidia.
As AMD continues to navigate this competitive landscape, the success of this acquisition will be closely watched by investors and analysts alike.
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Photo courtesy of AMD.
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