Advanced Micro Devices (NASDAQ:AMD) stock has skyrocketed year-to-date, thanks to the AI (Artificial Intelligence)-powered rally. However, the company’s management left its 2024 guidance unchanged despite the acceleration in AI opportunities. This raises concern and hints that a rally fueled by AI could lose steam.
But before we dig deeper, let’s understand AMD’s AI opportunity.
AMD – The AI Opportunity
According to its CEO, Lisa Su, AI presents a multi-billion-dollar growth opportunity for AMD. Further, the company recently launched the MI300X accelerator, its AI offering, to compete with Nvidia (NASDAQ:NVDA). Adding to these positives, the company announced at its Advancing AI event on Wednesday that top companies like Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), Dell Technologies (NYSE:DELL), and other renowned players adopted new AMD Instinct MI300X and MI300A data center AI accelerators for training and inference solutions.
Further, Su added that while AI presents plenty of growth opportunities, the data center accelerator TAM (total addressable market) is expected to grow from the initial $150 billion prediction to over $400 billion by 2027, at a rate of more than 70% annually. All these points indicate that AMD stock will benefit from the AI-led tailwinds.
The Concerns Surrounding AMD Stock
While the AI TAM outlook has increased, AMD’s management has left the Data Center GPU revenue forecast unchanged for 2024, which raises concern. Speaking at the Barclays Global Technology Conference on December 7, AMD’s CFO Jean Hu reiterated the earlier guidance and expects the Data Center GPU revenue to surpass $2 billion in 2024.
Highlighting the same, Mizuho Securities analyst Vijay Rakesh said, “There is some investor concern on AMD not raising its AI or overall 2024 outlook despite the higher TAM.” Nonetheless, Rakesh maintained a Buy rating on AMD stock on December 6. However, his price target of $130 indicates a limited upside potential of 1.27% from current levels.
What is the Prediction for AMD Stock?
Wall Street analysts are cautiously optimistic about AMD stock. With 25 Buy and nine Hold recommendations, AMD stock has a Moderate Buy consensus rating. Further, the average AMD stock price target of $129.45 implies 0.84% upside potential from current levels.
Bottom Line
The unchanged 2024 guidance despite growing TAM, near-term weakness in the Gaming and Embedded segments, and the significant rally in its share price could limit the upside potential in AMD stock. This is reflected in analysts’ average price target.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
