Benchmark analysts identified a certain AI chip stock as a promising investment in a note Thursday, reiterating their Buy rating and maintaining a $200 price target.
The firm highlighted AMD's (NASDAQ:AMD) strong performance in the AI and data center sectors.
They commented that AMD's solid June quarter results and encouraging September quarter guidance have significantly boosted investor confidence.
"AMD posted solid June quarter results and gave equally encouraging September quarter guidance," Benchmark noted, with revenue for the June quarter reaching $5.835 billion, surpassing the Street consensus of $5.724 billion, and EPS of $0.69 exceeding expectations by $0.01.
They noted that the company's robust performance was driven by its Data Center EPYC CPUs and Instinct AI-Accelerator GPUs, alongside a steady contribution from its Client Computing business.
Benchmark highlighted the significant growth in AMD's Data Center business, which reported sales of $2.8 billion, reflecting a 115% annual increase and a 21% sequential growth. This growth was fueled by the ramp-up of Instinct MI300X GPU shipments, surpassing $1 billion in quarterly revenue for the first time.
Benchmark analysts also emphasized the leverage expected in the September quarter, projecting a 33% quarter-over-quarter increase in EPS based on a 15% sequential revenue growth.
"We note the company's solid expected leverage in the September quarter," they stated, with annual sales growth estimated at 15.7% and annual EPS growth at 31.4%.
The firm also feels AMD's AI segment continues to show promising momentum. The company has raised its FY24 GPU revenue target multiple times, with the June quarter shipments exceeding $1 billion.
Benchmark's model estimates $1.35 billion in GPU revenue for the September quarter, growing to $1.75 billion in Q4, and reaching $11 billion in FY25, representing an annual growth forecast of 129%.
This strong performance and future growth potential present a discounted trading opportunity for investors, according to the firm. As Benchmark concluded, "We are reiterating our Buy rating and our $200 Price Target," highlighting AMD's continued positive outlook.