On Wednesday, Piper Sandler sustained its Overweight rating on shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) with a price target of $175. The firm's analysis highlighted AMD's robust quarterly performance and promising outlook, particularly emphasizing the company's data center (DC) business momentum. This segment's success is attributed to the MI300 accelerator as well as AMD's traditional server products.
AMD's data center GPU revenue surpassed the $1 billion mark in June, a figure that exceeded internal projections. Based on this performance, Piper Sandler projects that AMD's MI300 business could reach approximately $5 billion in 2024 and is expected to almost double to $9.7 billion by 2025. This growth in the data center sector is seen as a key indicator for investors, with AMD demonstrating notable progress in this area.
While the data center and client segments are expanding, the gaming division is anticipated to decline by mid-single digits in the September quarter. Additionally, the embedded business is experiencing a slower return to growth than previously expected. Despite these challenges, the focus remains on the data center GPU growth, particularly the MI series, where AMD continues to show strong performance.
Piper Sandler's reaffirmation of the Overweight rating and $175 price target reflects confidence in AMD's strategic direction and potential for continued growth in the data center market. The firm's position indicates a positive outlook for AMD's financial future, underscored by the significant revenue generated from its data center GPU offerings.
Advanced Micro Devices (AMD) has raised its 2024 sales outlook for AI chips, leading to a surge in its shares. This forecast also positively impacted Nvidia (NASDAQ:NVDA), another key player in the semiconductor space. However, Microsoft (NASDAQ:MSFT)'s shares experienced a decrease due to plans to increase spending on AI infrastructure amid a slowdown in its cloud sector.
Furthermore, AMD reported a 115% increase in data center revenue, its largest business segment, reaching $2.8 billion and slightly surpassing expectations. The company's total revenue for the second quarter was up 9% at $5.8 billion, beating the $5.72 billion estimate. For the third quarter, AMD projects revenues to be around $6.7 billion.
On a different note, Microsoft's Intelligent Cloud unit reported a 19% increase in revenue to $28.5 billion for the quarter ending June 30, which fell short of the $28.7 billion forecast by analysts. This led to declines in other major technology firms, including Meta Platforms (NASDAQ:META), Amazon.com (NASDAQ:AMZN), and Apple (NASDAQ:AAPL).
InvestingPro Insights
According to the latest InvestingPro data, AMD's market capitalization stands at a robust $235.71 billion, reflecting the company's substantial presence in the semiconductor industry. This is complemented by a high price-to-earnings (P/E) ratio of 174.73, which suggests that investors are willing to pay a premium for AMD's earnings, likely due to expectations of future growth. While the company's revenue saw a slight decline of 1.16% over the last twelve months as of Q1 2023, the quarterly revenue growth paints a more positive picture with a 2.24% increase in Q1 2023.
Two InvestingPro Tips that are particularly relevant to the article's focus on AMD's data center business include: AMD is expected to see net income growth this year, which aligns with Piper Sandler's optimistic revenue projections for the MI300 business. Additionally, AMD's status as a prominent player in the Semiconductors & Semiconductor Equipment industry underpins the company's potential to capitalize on the expanding data center market. For readers interested in a deeper dive into AMD's financial health and future prospects, InvestingPro offers additional insights and tips, with a total of 15 listed for AMD, available at InvestingPro's dedicated AMD page.
The InvestingPro Fair Value estimate for AMD is currently at $127.96, which provides a data-driven perspective on the stock's valuation. This figure, alongside Piper Sandler's price target and the latest financial metrics, offers investors a comprehensive view of AMD's market position as they consider the company's growth trajectory in the data center segment.
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