What Happened:
Shares of computer processor maker AMD (NASDAQ:AMD) jumped 7.5% in the morning session after Piper Sandler analyst Harsh Kumar named the company a "Top Pick" and maintained an Overweight (Buy) rating on the stock.
The analyst cited the reasons for the bullish view heading into the second half of the year, adding, "At this time, MI300 is performing very well with an expected ramp to greater than $4B this year..."
Harsh continued, "AMD has a slate of new chips coming out on top of MI300 later this year as well as 2025. To start, MI325 is expected to come out later this year and MI350 coming out in 2025. Finally, in 2026 we expect MI400 to come out. We note that MI325 and 350 both have HBM3E next generation memory. MI350 will also feature CDNA4 and a 3nm process node that will compete with the Blackwell architecture while MI400 is expected to be competitive to Rubin. In total, AMD has 100+ plus customers today that are ramping with MI300 with key customers including Microsoft, Meta, and Oracle." After the initial pop the shares cooled down to $161.71, up 4.6% from previous close.
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What is the market telling us:
AMD's shares are very volatile and over the last year have had 19 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the company gained 10.9% on the news that chip and AI stocks surged alongside broader market gains, with the Nasdaq rising by 2.1%, the S&P 500 by 1.5%, and the Dow gaining 0.57% following Nvidia's outstanding earnings results.
During its Q4'2024 earnings, Nvidia reported impressive topline results (7.6% revenue beat), big gross margin improvement, and EPS outperformance vs. Wall Street's estimates. Notably, revenue grew 265% year-on-year and 22% sequentially during the quarter.
The strong topline performance was mostly driven by the data center segment, which was up 409% year-over-year and 27% sequentially as demand for Nvidia processors optimized for generative AI, LLMs (large language models), and other AI workloads continued to accelerate. The company estimated that roughly 40% of Data Center revenue was driven by AI-related applications. Guidance for the next quarter was also good, with revenue, gross margin, and implied operating profit coming in ahead of expectations.
Overall, Nvidia's strong performance during the quarter highlighted the growing demand for AI-related technology and demonstrated the abundant growth opportunity for innovators within the space.
AMD is up 16.7% since the beginning of the year, but at $161.71 per share it is still trading 23.5% below its 52-week high of $211.38 from March 2024. Investors who bought $1,000 worth of AMD's shares 5 years ago would now be looking at an investment worth $5,389.
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