"The stock has great potential": analyst recommended to buy Nvidia competitor

Melius Research upgraded its rating on shares of the company, which is considered Nvidia's closest rival - chipmaker AMD. Now the investment firm recommends buying its securities and expects their price to rise by more than a third. Analyst Melius believes that the growing demand for AMD's AI chips will support the company's quotes, and investors may still have time to participate in a broader rally;

Melius Research analyst Ben Reitzes upgraded AMD stock from Neutral to Buy, writes Barron's. He also raised his target price from $110 immediately to $175, nearly 35% above the June 23 closing level. The analyst believes that the semiconductor giant's position in AI has improved significantly and it could gain a foothold in the AI chip market, although it will not come close to the leader, Nvidia.

"A lot has changed for the better since the beginning of the year. If we're right, the stock still has plenty of upside potential, even though [investors] missed the initial reversal from the bottom," Reitzes wrote. 

AMD shares jumped nearly 6% on Tuesday, June 24. They are down 14% since the beginning of the year, but have risen nearly 20% in the past month as investors welcomed the company's plans for new AI processors, Barron's explains.

Reitzes warned that the chipmaker's securities are "extremely volatile," as evidenced by their movement from $147 to $227 in 2024, and down to $76 in 2025. But, he said the company is past the early rebound stage, and its progress is not yet fully reflected in the price.  "We assume we are in the middle of a new uptrend as investors begin to plot even higher graphics processing unit (GPU) sales in 2026-2028," the analyst said, he quoted Investors Business Daily.

One of the key drivers of Melius' optimism is the growing interest in AMD's AI chips thanks to unexpectedly high demand for inference -that's the stage of applying an AI model to new data to get a result, which is essentially putting a neural network to work after the training stage. While Nvidia, which controls about 90% of the AI chip market, maintains its leadership in the training segment, AMD plans to strengthen its position in processors for inference  

In early June, the company unveiled a line of Instinct MI350 chips focused primarily on inference tasks. According to its estimates, these processors will provide performance four times higher than the previous MI300X model, writes Barron's. In addition, AMD announced that it will release the next generation, the MI400, in mid-2026.

In this situation, investing in the company looks increasingly attractive to hyperscalers - giants that build and operate large data centers, such as Amazon and Microsoft, as well as government entities, Melius analysts said.

New chips will help AMD capture 5% of the global market, Reitzes said. He raised his forecast for the company's processor sales this year - from $6 billion to $6.6 billion. Next year, AMD's revenue from their supplies will increase to $9.7 billion, in 2027 - to $13.1 billion, and by 2028- - will soar above $20 billion, expects the analyst. 

He also cited deals with companies such as Meta and OpenAI as growth drivers, and a $10 billion partnership with Saudi Arabia's Humain, which said in May that it would jointly deploy 500 megawatts of AI computing power with AMD over the next five years.

After the presentation of AMD's new chips, analysts at UBS reiterated a buy recommendation on the company's shares and a target price of $150, it implies an upside of almost 16%. 

HSBC in May rejected advice to sell chipmaker securities and suggested holding them in its portfolio. An investment bank analyst at the time also cited the potential offered by Saudi Arabia's agreement to invest in the U.S. economy, the prospects for new chips, and cited the trade truce with Beijing as encouraging.

A little earlier, Bank of America stated that there is plenty of room for AMD in the AI gas pedal market - despite Nvidia's dominance. In this segment, AMD can expect "a credible 3-4% share," the BofA analyst said.

According to data from MarketWatch, of the 54 analysts who track the company's stock, 72% advise buying it (Buy and Overweight ratings), while the remainder advise holding (Hold). There are no "sell" recommendations.

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