On Monday, Rosenblatt Securities maintained a positive outlook on shares of Advanced Micro Devices, Inc. (NASDAQ:AMD), affirming a Buy rating and a $250.00 price target for the company's stock. The firm's stance is based on the expectation that AMD will meet its third-quarter 2024 forecasts and provide a fourth-quarter outlook that may slightly exceed predictions, particularly due to the performance of its EPYC CPU and MI300/325 products.
AMD is anticipated to compensate for modest growth in its embedded segment and a double-digit decline in console sales with gains in other areas. The company is believed to be positioned for outperformance relative to its peers, following a period of market skepticism regarding its ability to secure significant market share with its MI300 product and amidst mixed results across its console and embedded/Xilinx segments.
Market checks indicate that AMD's chiplet/tile GPU yields are improving more than expected, which could lead to increased demand or reduced need for wafers. In contrast, competitor Nvidia (NASDAQ:NVDA)'s Blackwell yields appear to be weaker after adjustments to metallization, despite utilizing a monolithic die approach in the current cycle.
The analyst predicts that AMD will secure a double-digit share of the GPU compute market within the next year, a forecast considered to be conservative and not reliant on AMD having a significantly superior solution compared to Nvidia. The MI300/325/350 products are expected to demonstrate incremental improvements in competitive positioning.
In other recent news, Taiwan Semiconductor Manufacturing Company (TSMC) has suspended shipments to Sophgo, a China-based chip designer, following the detection of a TSMC-made chip on a Huawei AI processor. This move comes despite U.S. regulations aimed at safeguarding national security.
Sophgo, associated with cryptocurrency mining equipment firm Bitmain, maintains it has no business ties with Huawei. The U.S. Department of Commerce is aware of the potential violation of export controls, while TSMC, the world's largest contract chipmaker, is communicating with U.S. authorities and conducting an internal investigation.
In the semiconductor sector, Advanced Micro Devices (AMD) has been the focus of several analyst firms. Piper Sandler maintains an Overweight rating on AMD with a $200 price target, expecting continued positive developments in the company's GPU business.
Stifel also maintains a Buy rating on AMD shares with the same price target, citing continued momentum in the Data Center segment and potential upward revision of full-year MI300 revenue expectations. However, Oppenheimer adjusted its fourth quarter sales estimate from $7.7 billion to $7.5 billion, citing more conservative expectations for the PC and gaming sectors.
Investors are also closely monitoring semiconductor stocks following a week of significant market fluctuations. The Philadelphia SE Semiconductor index has seen a pullback from a 40% rise in the first half of the year to a 25% increase in 2024.
Meanwhile, global hedge funds have significantly increased their purchases of U.S. information technology stocks, particularly in sectors such as semiconductors and hardware, according to Goldman Sachs. These are all recent developments that are crucial for investors in the semiconductor sector.
InvestingPro Insights
Recent data from InvestingPro adds depth to Rosenblatt Securities' bullish stance on Advanced Micro Devices, Inc. (NASDAQ:AMD). The company's market capitalization stands at an impressive $252.86 billion, reflecting its significant presence in the semiconductor industry. AMD's revenue for the last twelve months as of Q2 2024 reached $23.28 billion, with a notable revenue growth of 8.88% in Q2 2024 compared to the previous quarter. This aligns with Rosenblatt's expectation of AMD meeting its third-quarter forecasts.
InvestingPro Tips highlight AMD's position as a prominent player in the Semiconductors & Semiconductor Equipment industry, supporting the analyst's view on the company's potential to gain market share. The tip suggesting that AMD's net income is expected to grow this year corroborates Rosenblatt's optimistic outlook on the company's performance, particularly in its EPYC CPU and MI300/325 product lines.
It is worth noting that AMD is trading at a high P/E ratio of 186.53, indicating investor confidence in the company's future growth prospects. This valuation metric, combined with the InvestingPro Tip pointing out AMD's high return over the last year (with a 1-year price total return of 62.01%), suggests that the market is pricing in substantial growth expectations, in line with Rosenblatt's bullish $250.00 price target.
Investors seeking a more comprehensive analysis can access 14 additional InvestingPro Tips for AMD, providing a deeper understanding of the company's financial health and market position.
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