Analyst calls rival Nvidia the best bet in the chip sector - after a 16% slump

Analyst TD Cowen has named chipmaker AMD as its top bet in the semiconductor sector for next year. He believes that investors are overestimating the risks associated with AI spending, while AMD's fundamental position remains strong. The analyst advised to consider buying the company's shares before its new products come to market.

Advanced Micro Devices (AMD) shares have "unfairly come under pressure due to excessive investor wariness" in the semiconductor sector, according to TD Kowen analyst Joshua Buckalter, whose opinion is cited by MarketWatch. In his estimation, "the company is facing an overly negative sentiment that is inconsistent with its fundamental positions," and this opens up buying opportunities. AMD's stock plummeted 16% in November, twice as much as rival chipmaker Nvidia.

Bucalter named AMD as his top choice among chipmakers for next year. He added that he favors the company over larger players such as Broadcom and Nvidia.

The analyst acknowledged that some of Wall Street's concerns about the sustainability of rising spending on artificial intelligence and increased competition from chipmakers are valid. However, tech giants continue to invest heavily in AI infrastructure, and AMD will be able to capitalize on that demand, Buckalter predicted.

According to the analyst, the pressure on the stock was exerted in particular by AMD's deal with OpenAI: the market fears that the startup may reduce or fail to fulfill its planned purchases of AI chips. However, Buckalter notes that AMD is reducing its dependence on a large client: large-scale implementations of its solutions are being prepared by such players as Oracle and Meta.

AMD's updated hardware roadmap, the development of its ROCm software platform and the expansion of its large enterprise customer base reinforce confidence that the company can successfully compete in AI computing and strengthen its market position, according to analyst TD Kowen.

The key event, in his opinion, will be the launch of the Helios data center solution and the new MI450 series of AI gas pedals in the second half of 2026. These products could become a serious growth driver for AMD stock, as they bring the company into a market with huge potential, including not only AI chips, but also CPUs and networking solutions. This part of the business is still undervalued by investors, notes Bucalter, although it provides the manufacturer with diversification and has strong potential.

AMD CEO Lisa Su said at November's Analyst Day that the data center market could reach $1 trillion by the end of the decade, a forecast that includes not only graphics gas pedals for AI, but also CPUs and network infrastructure. According to TD Cowen's estimates, AMD is able to take a share of about 11 to 17% in this market.

The analyst points out that investors should take a closer look at the chipmaker's shares in advance - before the large-scale withdrawal of Helios begins.

AMD shares rose 0.6% at the premarket on December 3, after closing Tuesday's trading down more than 2%. Despite the November collapse, the company's capitalization has grown by an impressive 80% this year, amid the hype around artificial intelligence and its increasing share of the data center market.

Even taking into account last month's sagging AMD securities remain overvalued, Barchart analysts point out. Multiplier P/E, which reflects the ratio of price to projected earnings of the company, is at 68.5 - this suggests that the quotes are too much hope. For investors with a long-term horizon this may be acceptable, but short-term players should approach such investments with caution, according to Barchart.

Wall Street as a whole looks at the prospects of AMD shares with optimism: they are recommended to buy 46 analysts, according to MarketWatch data . 11 - suggest to keep these securities in the portfolio, there is no advice to sell. The average target is $286, which suggests a potential upside of 32% from the last closing level.

This article was AI-translated and verified by a human editor