Citi advised to buy AMD stock: market underestimates potential in the fight with Nvidia

Citi Bank upgraded the rating of AMD shares and now advises to buy them. In addition, the analyst increased the target price of the chip maker's securities by about a quarter. According to Citi, AMD has the potential for growth in the market of graphics processors used for artificial intelligence, which the market is still underestimating. In this area, AMD is challenging the absolute leader - Nvidia.

Citi analyst Atif Malik upgraded his recommendation on AMD shares from Neutral to Buy, and raised his target price from $460 to $575, Barron's writes. The new target is 18% above the closing price on June 11. In trading on Friday, June 12, shares of the chipmaker were growing at the moment by 6%.

Advanced Micro Devices shares have risen 140% so far this year on expectations of demand for central processing units (CPUs) as they are now used to power agent-based AI, Barron's writes. However, investors should also pay attention to the company's potential in graphics processing units (GPUs), Citi analysts said. In this category of chips, the company is trying to compete with market leader Nvidia.

According to Malik's assessment, the market has not yet fully put AMD's potential in GPUs into quotations. Now, the analyst believes, investors estimate the realization of the scenario in which sales of graphics processors of the company will exceed $50 billion by 2028, only with a probability of 60%. Malik considers this position too cautious: according to the bank, AMD may sell more GPUs to large customers, primarily Meta. "We now see AMD becoming a full-fledged second vendor in the GPU market, with the company poised to get the lion's share of Ma's orders," Malik wrote.

On June 11, BofA Securities analyst Vivek Arya raised the target price of AMD shares from $500 to $560, Investing.com writes. The bank explained the revision by higher estimates of the total demand for CPUs and GPUs: so, according to BofA, in 2030 market demand for CPUs may exceed $170 billion. Earlier the bank estimated demand at $125 billion. At the same time AMD, according to the bank, is the beneficiary of this demand.

On June 1, Barclays analyst Tom O'Malley maintained an Overweight rating ("above market") on the chipmaker's stock and raised its target price to $665 from $500, The Street wrote. Barclays believes the market is underestimating how agent-based AI could increase demand for server CPUs.

Also in early June, TD Cowen analyst Joshua Buchalter maintained a Buy rating for AMD securities and raised his target price from $500 to $600

According to MarketWatch, of the 57 analysts tracking the chipmaker's stock, 47 advise buying it, while another 10 have taken a neutral stance. The Wall Street consensus estimate is $492.5, up nearly 1% from the closing price on June 11.

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