On Monday, Northland analysts maintained a positive outlook on AMD stock (NASDAQ:AMD), currently trading at $125.19, reiterating an Outperform rating and a price target of $175.00.
The firm's analysts highlighted AMD as one of their top picks for the calendar year 2025 (CY25), anticipating the company to continue gaining market share in various segments, including AI GPUs, server CPUs, and PC clients.
They expect these gains as the company overcomes challenges in the embedded and gaming segments. According to InvestingPro data, AMD maintains strong financial health with a current ratio of 2.5, indicating solid liquidity to support its growth initiatives.
The analysts expressed confidence in AMD's product superiority in server and client CPU markets and its competitive roadmap in AI. They project a significant PC refresh cycle ahead, driven by Microsoft (NASDAQ:MSFT) ending support for Windows 10, which could lead to a substantial number of system upgrades.
AMD's AI revenue for CY25 is conservatively estimated to reach $9.5 billion, up from $5.2 billion, with the first half of CY25 expected to see a 7% increase from the second half of CY24. InvestingPro analysis shows AMD's strong revenue growth of 9.88% over the last twelve months, with analysts expecting continued profitability this year.
In the server CPU market, early indications suggest that AMD's Turin outperforms Intel's Granite Rapids in most workloads. Northland projects AMD's non-AI data center revenue in CY24 to be $7.7 billion, a 26% year-over-year increase, and forecasts a 10% increase to $8.5 billion for CY25. The analysts consider these projections conservative and a potential source of upside.
For PC clients, the expectation is that AMD will continue to take market share from Intel, with client revenue in CY25 predicted to be $7.9 billion, a 15% year-over-year increase. This figure could rise by an additional $1 billion to $2 billion if the replacement cycle occurs as expected and AMD maintains its market share.
Regarding other revenue streams, Northland estimates that embedded revenue declined by $1.7 billion and gaming revenue fell by $3.7 billion in CY24. However, they predict a rebound in embedded revenue to $4 billion in CY25, up $350 million year-over-year. While gaming revenue is forecasted to drop to $770 million, it has the potential to remain flat year-over-year.
InvestingPro analysis indicates AMD is slightly undervalued at current levels, with 16 additional exclusive ProTips and a comprehensive Pro Research Report available for deeper insights into AMD's financial health and growth prospects.
In other recent news, Advanced Micro Devices (NASDAQ:AMD) and LuminArx Capital Management have jointly invested $333 million in cloud startup Vultr, reflecting the growing demand for artificial intelligence (AI) infrastructure. This funding will allow Vultr to acquire more graphics processing units (GPUs) for powering AI models. Meanwhile, AMD and Nvidia (NASDAQ:NVDA) have expanded access to their GPUs among numerous cloud providers, further enhancing their market visibility.
On another note, KeyBanc Capital Markets maintained its Overweight rating on AMD with a price target of $220. The firm also retained its Overweight rating on ARM with a price target of $195. Meanwhile, Intel's Sector Weight rating was maintained, with a fair value of $19 based on 22 times the 2025 earnings per share estimate.
In a recent development, the Biden administration's plan to limit the number of AI chips that companies can install in computing facilities in certain countries was challenged by two U.S. senators. They expressed concerns that the proposed restrictions could impede the sale of U.S. technology overseas and potentially drive foreign buyers towards Chinese competitors like Huawei.
Lastly, Wolfe Research expressed skepticism about Intel Corporation (NASDAQ:INTC)'s ability to maintain its status as an integrated device manufacturer (IDM), citing intensifying competition and market conditions.
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