Wells Fargo recommended buying AMD stock ahead of the report. What is their potential?

Wells Fargo on Wednesday reiterated a buy recommendation on shares of chipmaker Advanced Micro Devices and raised its target price one and a half times. The investment bank expects the company to report revenue growth from sales of AI chips for data centers in its second-quarter report, which will be released Aug. 5. And Evercore expects AMD's results to be positively affected by the resumption of shipments to China.

Wells Fargo analyst Aaron Rakers on Wednesday, July 16, raised the target price of shares of chipmaker AMD from $120 immediately to $185, expecting their growth of 17% from the level of the last close. He also reaffirmed the company's "above market" (overweight) rating, which equates to a buy recommendation.

"We believe AMD will show data center GPU revenue growth in the second half of 2025," Rakers wrote in a note that CNBC cited. The biggest contribution, he estimates, will come from scaling shipments of the new MI355X chips, which began shipping last month. AMD still has significant growth potential due to demand from the corporate sector, the analyst believes;

Rakers also expects AMD to execute its technology roadmap smoothly and ramp up on time for the fifth generation of EPYC server processors built on the new Zen 5 (Turin) architecture. In addition, the company will continue to actively deploy the previous generation of platforms - Zen 4 under the names Genoa and Bergamo, which are already in use in modern data centers.

AMD shares responded to Wells Fargo's recommendation with a 3% gain. They have gained more than 76% over the past three months, significantly outperforming the S&P 500 index, which has added just over 18% over the same period. AMD's shares have risen more than 15%;

One driver for AMD could be regaining access to the Chinese market, which has been closed to the U.S. chipmaker since April amid a trade war between Washington and Beijing. This week, the U.S. Commerce Department said it would review applications for licenses to sell AMD's MI308 AI chips to China, whichcompete with Nvidia's export version of its H20 processors. Following the news, AMD shares jumped 7% in trading on July 15.

In the spring, the company recorded $800 million in write-downs related to inventory and purchase contracts due to the blockage of exports to the Chinese market. This has put pressure on gross margin: the outlook for this measure in the second quarter is now 43%, while without the restrictions it could have reached 54%, wrote Seeking Alpha.

Evercore ISI analysts led by Mark Lipakis expect the resumption of MI308 shipments could bring the chipmaker a $700 million revenue boost in the short term and $1.5 billion in the medium term.  "AMD previously estimated a second-quarter revenue decline of about $700 million due to export restrictions and a total negative impact on revenue in 2025 of $1.5 billion," said Evercore in a note published July 16, as cited by Seeking Alpha. - We now expect processor revenue in 2025 to be around $6 billion."

On July 10, HSBC analyst Frank Lee raised AMD's stock rating from Hold (advising to keep it in the portfolio) to Buy (recommending to buy). And he increased the target price twice - from $100 to $200. The new target implies a 25% increase in the value of the securities from the closing level of trading on July 15. HSBC cited AMD's new AI chips as a key factor for the upgrade. The MI350 series of AI processors show notable markup and performance improvements that could rival Nvidia's Blackwell lineup: this will impact revenue, Lee expects.

Wells Fargo and HSBC recommendations are among 37 "bullish" AMD estimates from Wall Street analysts. Another 15 hold a neutral stance, according to LSEG data. Meanwhile, the consensus price target is around $138 per AMD share, which implies a 14% decline from current levels.

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