Some analysts were relieved by AMD's latest artificial-intelligence disclosures, but one warned of a lack of 'specs or anything that might help to gauge uptake'
Advanced Micro Devices Inc. offered some relief to investors as the company further discussed its artificial-intelligence roadmap Tuesday, but there remain many unknowns.
While the chip company reported earnings that were slightly better than-expected on Tuesday, Wall Street seemed more focused on AMD's $(AMD)$ future opportunities around AI, especially as rival Nvidia Corp. $(NVDA)$ is increasingly synonymous with the hot market for AI accelerators.
"In addition to strong traction in Genoa, the company further reiterated MI300 is sampling now and on track for launch and ramp in [the fourth quarter]," Cowen & Co. analyst Matthew Ramsay wrote after the report, referring to the company's new AI chip. "In our view, these were key concerns for investors coming into the call and while the [data points] were positive ... for some the [fourth quarter] implied [data center] ramp of 45% [growth on a sequential basis] will still very much need to be proven."
He rates the stock outperform with a $135 target price.
The results and commentary prompted at least one analyst, Christopher Danely of Citi Research, to take a more bullish view of AMD shares.
"We had thought AMD's AI products (MI300) would be margin dilutive, but the company stated it should be margin accretive," he wrote, as he raised his rating on the stock to buy from neutral and lifted his target price to $136 from $120. "We also thought investors would eventually tire of the expensive valuation of AMD stock and we were wrong on that count as well."
Srini Pajjuri of Raymond James left the call with the impression that AMD's AI engagements were "tracking well," though it could take time for AMD to realize its financial opportunities fully.
"We believe AMD has design wins with MSFT, META, and AMZN, and are assuming [a] several hundred million dollar contribution in 2024," he wrote. "While supply chain points to a larger number, qualification cycles typically take a few quarters and revenue ramps are likely to be gradual as a result."
Pajjuri has a strong buy rating and $145 target price on AMD's stock.
Stacy Rasgon of Bernstein, meanwhile, was more cautious.
AMD executives "themselves suggested a 2H-loaded trajectory (which makes sense as they have only just started to sample) which may limit growth next year, andat this point while we are sure there is customer interest we have seen no specs or anything that might help to gauge uptake," he wrote.
"We understand the thesis that suggests even getting the dregs of a huge opportunity is enough (maybe?)," Rasgon continued. "But unless numbers get really material, soon, we fear estimates remain too high (we are still below $4 [in estimated adjusted earnings per share] next year) and the stock looks a little stretched to us."
He has a market-perform rating on the stock and a $95 target price.
Oppenheimer's Rick Schafer added that it was "difficult to confidently model given lack of design-wins and/or timeline," so he'll "remain sidelined as AMD's AI strategy proves out."
He has a perform rating on the stock.