On Wednesday, Baird adjusted its outlook on AMD (NASDAQ:AMD) shares, lowering the price target to $175 from the previous $200 while keeping an Outperform rating on the stock. The firm's analysis reflects a reassessment in the wake of recent market movements and anticipates a favorable opportunity for investors at the current share price levels.
The decision to revise the price target follows a consideration of various factors, including the recent decline in AMD's stock price and a more optimistic growth forecast for the second half of the year. The firm noted that AMD's artificial intelligence (AI) revenue guidance has increased by an additional $500 million, with the second quarter and third-quarter earnings expected to surpass previous estimates.
Baird's report also highlighted that AMD's management anticipates supply constraints to continue into 2025, suggesting a sustained strong demand for the company's products. The client segment is projected to perform better than seasonal trends in the latter half of the year, driven by the introduction of Zen 5 architecture.
Despite a positive outlook on demand and product performance, the gross margin forecast is somewhat less optimistic than previously expected, attributed to product mix. Nevertheless, Baird anticipates gross margin expansion to persist over time, reinforcing the Outperform rating for AMD's shares.
In other recent news, Advanced Micro Devices (NASDAQ:AMD) has been making significant strides in the data center sector. The company's data center GPU revenue surpassed the $1 billion mark in June, exceeding internal projections. Analysts at Piper Sandler project that this growth could reach approximately $5 billion in 2024 and almost double to $9.7 billion by 2025. The firm maintained its Overweight rating on AMD shares with a price target of $175.
In terms of leadership changes, AMD announced the retirement of its President, Victor Peng, with Vamsi Boppana and Salil Raje taking on additional responsibilities. On the financial front, AMD reported a 115% increase in data center revenue, reaching $2.8 billion, 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.
AMD also raised its 2024 sales outlook for AI chips, positively impacting Nvidia (NASDAQ:NVDA), another key player in the semiconductor space. However, Microsoft (NASDAQ:MSFT)'s shares experienced a dip due to plans to increase spending on AI infrastructure amid a slowdown in its cloud sector.
The company's Intelligent Cloud unit reported a 19% increase in revenue to $28.5 billion for the quarter ending June 30, falling short of the $28.7 billion forecast by analysts.
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