Wolfe Research said Thursday it has made a tactical shift by replacing Nvidia (NASDAQ:NVDA) stock with AMD (NASDAQ:AMD) on its top selection of stocks known as Wolfe Alpha List.
“Our views on NVDA and AMD haven't changed, but the relative move in stock prices YTD causes us to make a tactical shift in priority, moving AMD to the Wolfe Alpha List, replacing NVDA, which is up ~90% YTD and ~100% since it was added to the list in November 2023,” analysts explained in a note.
The equity research firm expects NVIDIA's leading competitive position in AI to fuel significant demand and pricing leverage for its data center GPUs in the coming years. However, in the near term, analysts do not anticipate an exceptional beat when NVIDIA reports F1Q25 results on May 22.
Still, they foresee a much stronger second half of 2024 for the chipmaker as additional Chip-on-Wafer-on-Substrate (CoWoS) capacity becomes available, enabling NVIDIA to catch up on unfulfilled H100 demand and begin shipping the B100 in Q4.
“Strong CY24 hyperscale capex also bodes well for longer-term growth/performance but is not a near-term catalyst,” analysts added.
As for AMD, Wolfe notes the chip manufacturer’s memory issues were largely transitory and now seem resolved.
Analysts see a plausible path to a $2 billion MI300 revenue run rate by year-end, which could act as an incremental catalyst for the stock. They project server graphics revenue of approximately $4 billion for calendar year (CY) 2024 and $7.3 billion for CY25 “and remain constructive on upward AI revenue guidance revisions through 2H24 as demand visibility improves.”
“We note that consensus reflects improvement in AMD's server CPU revenue - we do expect improvement in revenue driven by ASP/share despite LSD% y/y growth in units, but the extent of that improvement likely represents the biggest risk to the AMD story,” analysts continued.
Finally, Wolfe believes AMD's growth should also benefit from a cyclical recovery in server/client CPUs following inventory depletion and replenishment in the Embedded (FPGA) market, particularly in the seasonally stronger second half of 2024.
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