AMD is likely to boost its AI revenue outlook. Can that help its sagging stock?

MW AMD is likely to boost its AI revenue outlook. Can that help its sagging stock?

By Emily Bary

AI revenue expectations for the year are already higher than AMD's prior guidance, an analyst noted

Advanced Micro Devices Inc.'s artificial-intelligence story "will still probably be all that matters to investors" when the company posts second-quarter earnings on Tuesday, according to Bernstein analyst Stacy Rasgon.

And to that end, the company is likely to raise its AI revenue outlook once again, he believes. But will that be enough to help its stock, which has been one of the S&P 500's SPX weakest performers since July 10?

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Rasgon and his team "would be surprised to see upside to current expectations which already sit above" AMD's $(AMD)$ guidance. Further, he pointed to "recent newsflow" around possible issues with high-bandwidth memory and the planned retirement of Victor Peng, the company's president, two factors he deemed "less than supportive."

"Valuation has at least moderated in recent weeks on the sell-off," Rasgon noted, with AMD shares now down on the year and trading at roughly 30 times forward earnings estimates. "We feel a bit better here with the shares in the vicinity of our target price, but we are not necessarily ready to take a bigger swing just yet," he wrote, while sticking with his market-perform rating and $140 target price.

The company's "burgeoning AI narrative may not be keeping up with expectations, and is offset somewhat by core business weakness," Rasgon concluded.

AMD shares have shed 6% on the year through Thursday's close, though they're up about 2% in Friday's premarket action as they - and the broader semiconductor sector - look to snap three sessions in a row of declines.

Rosenblatt's Hans Mosesmann also weighed in on AMD shares on Friday. He too expects an uplift to AMD's $4 billion-plus full-year revenue expectation for its AI accelerator product, but he said "it's important to note that the business is constrained by supply chain limitations."

Mosesmann is more bullish on AMD shares, however, noting that while the market has various concerns about the company's future competitiveness, he expects that AMD "will only get relatively stronger" in a market where the "edge" and open architecture become more important.

He rates the stock a buy with a $250 target price.

See also: Is Broadcom's stock benefiting from Nvidia 'fatigue'?

-Emily Bary

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July 26, 2024 09:12 ET (13:12 GMT)

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