Jefferies analysts expect AMD to surge 47%. A new leader in the AI market?

Analysts at Jefferies upgraded the shares of semiconductor giant AMD and raised their target price almost twofold, putting the upside at 47%. The reason was a large-scale partnership with OpenAI, under which the ChatGPT developer will be able to get up to 10% of the company. Analysts call the agreement one of the key events in the "arms race" in the AI-chip market. The deal raised AMD shares by almost a quarter in one day.

Analysts at Jefferies upgraded Advanced Micro Devices (AMD) shares from a "Hold" (Hold) to a "Buy" (Buy) after the chip maker entered into a large-scale partnership with OpenAI. At the same time, they raised their target price on the stock from $170 to $300, Seeking Alpha reports. This suggests a potential upside of 47% from the closing level on Monday, October 6 ($203.7). AMD shares were up 23.7% at the close of trading on October 6, and added another 3% or so in morning trading on October 7.

On October 6, it became known that OpenAI plans to use AMD chips to support the large-scale computing infrastructure needed to develop its AI projects. OpenAI intends to use 6 gigawatts of computing power, using several generations of AMD GPUs. These chips will be used to train and run future artificial intelligence models.

This partnership, according to estimates by Jefferies analysts led by Blaine Curtis, could bring AMD more than $100 billion from OpenAI, new and existing customers over the next four years.

Curtis noted that AMD is able to increase its server processor market share by about 500 basis points annually thanks to the new Venice platform, Seeking Alpha writes. Previously, analysts had not seen signs of large-scale growth in orders for artificial intelligence hardware from ODMs that make turnkey products. However, the announcement of OpenAI as a key customer with expected revenues of $80-100 billion and 6 GW of computing capacity through 2030 has significantly changed the outlook. Jefferies estimates that OpenAI is actively developing infrastructure for AI and plans to continue purchasing hardware in the future.

AMD shares on Oct. 6 hit their highest level since March 2024 after news of its partnership with OpenAI, MarketWatch reports. At the end of trading, the company's market capitalization rose to $330.6 billion, the second-highest in AMD's history and a record one-day gain of $63.3 billion. AMD shares led the S&P 500 and Nasdaq 100 indexes in gains for the day.

As part of the agreement, OpenAI received warrants to purchase up to 160 million shares of AMD stock at $0.01 per share. These rights will be activated as the parties reach key milestones in their collaboration and correspond to approximately 10% of the company's total outstanding shares.

Wedbush analyst Dan Ives characterized the deal as "yet another confirmation that the artificial intelligence arms race between major technology companies is accelerating rapidly." He compared current events to the technology boom of 1996, noting that OpenAI's 10% stake in AMD is "a huge advance of confidence and an instant entry for the company into the core of the AI chip market."

Wedbush believes that the AI industry is entering a new phase of active growth, with investments by major IT companies reaching billions of dollars, and corporate clients around the world beginning to actively implement AI solutions.

Mizuho analysts led by Vijay Rakesh noted that the agreement gives AMD strong short-term support for its Instinct gas pedal lineup strategy, although Nvidia, in their opinion, still retains market leadership. The experts also warned of possible funding difficulties by the time the MI450 series is released.

Jack Gold, president of J. Gold Associates, added that the partnership with AMD demonstrates OpenAI's commitment to diversifying its processor supply and reducing its dependence on Nvidia. He also expressed confidence that other leading AI companies will soon start using AMD solutions in their data centers, calling the agreement a "major win" for the chip maker.

AMD has a total of 56 ratings from analysts, and the most popular recommendation is Buy (32 Buy ratings and 6 Overweight), MarketWatch shows. The remaining 18 analysts think the stock is worth holding (Hold). The average target price is $204.97, which is only slightly higher than the current price.

AMD CEO Lisa Su called the partnership with OpenAI a mutually beneficial alliance, bringing together the best technologies from both companies to create the world's largest artificial intelligence infrastructure and strengthen the entire AI ecosystem, MarketWatch writes.

According to AMD CFO Jean Hu, the company expects to generate tens of billions of dollars in revenue from its partnership with OpenAI. It is expected to begin in the second half of 2026, and AMD expects to reach tens of billions of dollars in annual sales of data center solutions by 2027.

OpenAI CEO Sam Altman, who previously received $100 billion in investment from AMD's rival Nvidia, said AMD's leadership in high-performance chips will help the company accelerate its development and bring advanced artificial intelligence capabilities to all of humanity.

According to Lisa Su, the artificial intelligence market has a ten-year growth horizon, and such partnerships are a prerequisite for promoting the best technologies and bringing the ecosystem together.

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