What Happened:
Shares of computer processor maker AMD (NASDAQ:AMD) jumped 5.6% in the morning session after NewStreet Research analyst Pierre Ferragu upgraded the stock's rating from Neutral to Buy and assigned a price target of $215. The price target represents a potential 20% upside from where shares traded when the upgrade was announced. The analyst added, "AMD is the best way to play datacenter AI chips if the company's forecast of a $400 billion addressable market by 2027 bears out." As a reminder, on December 6, 223, AMD held a product event. There were endorsements for its MI300 product from Microsoft, Oracle, Meta, and others, and AMD now sees the data center AI chip market at $400bn in 2027, up significantly from its forecast of $150bn just last year.
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What is the market telling us:
AMD's shares are very volatile and over the last year have had 23 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 previous big move we wrote about was 5 days ago, when the company gained 5.1% on the news that Raymond James maintained a Strong Buy rating and raised the price target on the stock from $140 to $190. The price target represents a potential 10% upside from where shares traded when the update was announced. Separately, stocks rallied as the S&P 500 index reached an all-time high, gaining 1.1%. The tech-focused Nasdaq index also gained 1.5% as we head into a new earnings season, with early indicators pointing to a potential turning point for semiconductor stocks after the challenges in 2023.
On January 18, 2024, semiconductor giant Taiwan Semiconductor Manufacturing kicked off the new earnings season, reporting strong Q4'2023 results that exceeded Wall Street's revenue and EPS expectations. During TSMC's earning call, CEO C.C. Wei added, "2023 was a challenging year for the global semiconductor industry, but we also witnessed the rising emergence of generative AI-related applications, which TSMC as a key enabler." Looking ahead, the company expects revenue to grow in the low-to-mid 20% range in 2024, supported by "strong demand for nanometer technologies and robust AI-related demand."
AMD is up 28.2% since the beginning of the year. Investors who bought $1,000 worth of AMD's shares 5 years ago would now be looking at an investment worth $8,523.
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