Advanced Micro Devices earned a fresh buy rating on Tuesday as a Wall Street analyst upgraded AMD stock after talking with industry contacts about adoption of the company's chips.
Truist Securities analyst William Stein upgraded AMD stock to buy from hold and raised his price target to 213 from 173.
On the stock market today, AMD stock rose 2% to close at 166.62.
Industry contacts have told Truist over the last month that hyperscale data-center customers are working more closely with AMD. They are now "expressing true interest in deploying AMD at scale" for AI projects, Stein said.
In years past, those same customers were only experimenting with AMD's technology and using AMD as a "price check" to industry leader Nvidia, he said.
Stein reiterated his buy ratings on Nvidia and custom AI chipmaker Broadcom while recognizing the positive sentiment shift for AMD.
Stein noted that AMD came out of nowhere to challenge Intel in server central processing units, capitalizing on Intel's product stumbles.
"To be clear, we do not anticipate Nvidia will make the same missteps that Intel did, so we do not anticipate AMD's data center GPU (graphics processing unit) share will become so robust as its CPU share has become," he said.
Stein estimated that AMD could take 10% of the data center GPU market over time.
AMD Stock Is On Tech Leaders List
In other news, IBM announced a partnership with AMD to develop next-generation computing architectures based on the combination of quantum computers and high-performance computing, known as "quantum-centric supercomputing."
On Monday, AMD stock dropped 2.6% on a report by Bluefin Research Partners that said AMD was facing thermal issues with its MI350 artificial intelligence accelerator. The report said the difficulties occurred during qualification tests at customer xAI. Sources told Bluefin that the thermal issues were "causing a high rate of failures."
AMD stock is on the IBD Tech Leaders list.
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