While the market's focus has been heavily on CPUs, leading to a strong performance for chip giant Advanced Micro Devices (AMD) stock this year, Citi analysts argue investors should not overlook its potential in GPUs. The bank recently upgraded its rating on AMD shares from "Neutral" to "Buy," significantly raising its price target from $460 to $575.
AMD's stock has more than doubled year-to-date, primarily driven by demand for its AI-optimized CPUs. However, Citi analyst Atif Malik's optimism is largely based on the company's GPU sales prospects, especially as it competes more directly with market leader NVIDIA (NVDA). Malik contends that the market is currently mispricing AMD, with most investors still viewing it as a CPU play. He suggests the current stock price implies only about a 60% probability of AMD achieving over $50 billion in GPU revenue by 2028, which he believes severely underestimates the coming wave of GPU demand for AMD.
The Core Catalyst: A Major Deal with Meta
The primary catalyst for Citi's significant rating upgrade stems from a strategic partnership between AMD and social media titan Meta Platforms (META). The disclosed agreement involves a multi-year supply deal for AI data center GPUs with a capacity of 6 gigawatts, accompanied by warrants for 160 million shares of common stock. The first 1 GW of deliveries is scheduled to begin in the second half of 2026 and continue into 2027.
Citi estimates that each gigawatt of supply corresponds to roughly $15 billion in revenue for AMD. This suggests that Meta alone could potentially contribute nearly $90 billion in revenue to AMD under this agreement framework. Malik asserts that AMD, with the jointly developed custom MI450 chip offering a lower total cost of ownership, is positioned to capture the "largest share" of Meta's future GPU procurement.
"We now believe AMD is becoming a truly credible second source in the GPU market and is likely to win the majority of Meta's share," Malik wrote. Based on this partnership and broader market expansion expectations, Citi substantially raised its financial forecasts for AMD's AI business, projecting it to reach $33 billion in 2027 and $50.8 billion in 2028.
CPU Business Remains a Strong Foundation
It is important to note that the analyst's positive view is not solely based on AMD's GPU bets; its foundational CPU business continues to garner Wall Street favor. Following the Computex trade show, Malik raised his model's forecast for the total addressable market for CPUs by 2030 from $132 billion to $137 billion.
He maintains that AMD will remain a "key beneficiary of the CPU renaissance," citing advantages such as performance leadership, increased core counts, the x86 instruction set architecture, a richer SKU portfolio, and comprehensive capabilities across multi-threaded and single-threaded workloads. Comparing AMD's upcoming Venice CPU with competing products, Malik sees AMD's offering as superior. He expects the Venice series to cover a range from about 8 to 256 cores, supporting "multiple workloads" while maintaining performance leadership and meeting diverse computing needs.
The Citi upgrade follows a move by Bank of America, which just a day prior raised its AMD price target from $500 to $560 and named AMD its top pick in the CPU space. Bank of America analyst Vivek Arya significantly increased his server CPU TAM estimate for 2030 from $125 billion to $170 billion, viewing agentic AI as a powerful catalyst for demand in the segment.
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