Truist advised buying shares of major rival Nvidia on the eve of its reports

Analyst Truist upgraded the shares of microprocessor maker AMD: now recommends buying them and expects their price to rise by more than 30%. According to him, the company is beginning to attract large customers among hyperscalers and is able to secure a share in the market of AI chips for data centers, where Nvidia dominates. AMD shares jumped nearly 4 percent on the back of the news. They are three percentage points ahead of Nvidia's securities in terms of growth this year.

Truist analyst William Stein upgraded AMD stock from a Hold recommendation to a Buy recommendation, and increased the target price from $173 to $213, CNBC reports. Stein's new target suggests the potential for the company's stock price to grow by more than 30% from the closing level on August 25. The company's stock growth driver will be the fact that it is attracting more large customers in the AI field and is able to take a share in the lucrative market of graphics processors for data centers, the analyst said.

Earlier Truist believed that competitor Nvidia has gone so far ahead in the segment of data centers that AMD will not be able to gain a foothold in this niche, and its solutions were used only as a "price point" to Nvidia products, writes Barron's. However, now Stein notes that the situation has changed.

"Over the past month, more and more contacts indicate that hyperscalers (big cloud giants. - Oninvest) are starting to work with AMD on partnership terms, showing real interest in large-scale adoption of its solutions," the analyst said in a note cited by CNBC.

While AMD's share of the data center processor market was less than 1% before 2018, it surpassed 21% after the release of Rome processors in 2019, helped in part by manufacturing failures at Intel, Barron's notes. Nvidia is unlikely to make similar mistakes, Stein says, but AMD's new MI355 AI chips could play the same role in the GPU market as Rome did in the processor market. Earlier Truist predicted almost zero share of AMD in GPUs for data centers, but now expects that it can fix itself at the level of about 10%. However, it is still difficult to name the exact terms.

AMD shares jumped almost 4% to $169.7 in trading on August 26. Since the beginning of the year, the market value of the company has grown by almost 38%. For comparison: the main U.S. stock index S&P 500 for the same period added about 9.5%, and Nvidia securities - about 35%.

An additional growth driver for AMD quotes on Tuesday was the chipmaker's announcement of a partnership with International Business Machines (IBM) in the field of "quantum-oriented supercomputers", Barron's notes. The companies intend to jointly develop new computing architectures that combine AMD's CPUs and GPUs with IBM's quantum technologies. No new products have been unveiled yet, but the joint statement notes that such technologies will be able to solve application problems with unprecedented speed and scale. The first demonstration of the technology should go live later this year.

Nvidia stock has a total of 55 ratings from analysts tracking its performance, with 39 advising buy (Buy and Overweight ratings). Another 16 are neutral with a Hold rating and no advice to sell. Wall Street's average target price on AMD stock is $191.3 - up 17% from the last close.

The recommendation to buy AMD shares appeared on the eve of the publication of Nvidia reports. It is expected on August 27 after the close of the main trading in the United States. In anticipation of the report, several analysts raised the target price of the chipmaker's shares.

Wall Street expects Nvidia to post double-digit revenue growth. So far, the reporting season is giving positive signals for the company: hyperscalers like Meta, Microsoft, Alphabet and Amazon have promised to spend billions on capital expenditures. About 40% of Nvidia's revenue comes from those four companies - the chipmaker is likely to be the main beneficiary of their spending, Bloomberg wrote. Still, with expectations so high, any disappointment in the report could trigger a market-wide correction, the agency warned.

"It could have a disproportionate impact if there is some negative surprise," Brian Mulberry, a portfolio manager at Zacks Investment Management, told Bloomberg. - But the likelihood of Nvidia not meeting expectations is extremely Ma."

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