Analysts predict 49% growth potential – here’s why News ad

Analyst ratings can have a significant impact on stock price movements. Perhaps that is why the shares Advanced Micro Devices Inc. NASDAQ: AMD rose 4.2% for the week ending January 17, 2025. In this case, it was Loop Capital that initiated coverage of AMD shares with a Buy rating and a $175 price target.

Advanced microdevices today

AMD

Advanced microdevices

$121.46 +3.02 (+2.55%)

As of 01/17/2025 16:00 Eastern

52 week range

$114.41

▼

$227.30

P/E ratio

109.42

Target price

$178.61

Loop Capital is just one analyst firm that is bullish on AMD stock. An Advanced Micro Devices analyst on MarketBeat has a price target for the stock of $178.61, up 49% from its Jan. 17 price.

That’s why it’s useful to understand why analysts give a stock a particular rating. In this case, Loop believes that AMD shares, which are still down 24.4% over the past 12 months even after the recent rally, do not accurately reflect “some success in accelerated computing… and unique opportunities to expand market share in general purpose computing markets PCs and regular servers.”

This should be music to the ears of AMD shareholders, who suffered a setback last year despite the company reporting higher annual revenue and profit. However, it appears that analysts like Loop Capital may be paying attention to the opportunity that exists in AMD stock.

Among tech stocks, the chip market is often a “what have you done for me lately” sector, and AMD’s slow and steady performance isn’t enough to get investors excited. In fact, despite announcing a significant slate of products the company will release in 2025, AMD shares fell as investors remained focused on the GPU market when it comes to chip stocks.

However, this is where the optimistic case for AMD comes into play. The company will release MI300X graphics processing units (GPUs) in the first quarter of 2025. The company did not provide details about the GPUs at the Consumer Electronics Show (CES) in January. This is a bit strange because this is where the company is most likely to be able to capture market share. NVIDIA Company NASDAQ: NVDA.

For starters, AMD will be supplying GPUs at a time when enterprises are looking for alternatives to NVIDIA. And with NVIDIA Blackwell devices sold out, another company has an opportunity to get its foot in the door.

Before you consider investing in AMD stock, you should consider why the MI300X series is so important to the company. MI300X has unmatched memory and bandwidth and is designed to handle AI inference workloads.

To answer the next question that many investors will have, AI inference is what happens when the AI ​​model begins to recognize patterns in the data that it has not seen before. This allows the model to reason and perform predictive analysis similar to human abilities.

Now consider that the growing demand for AI training and inference is expected to be the main reason to believe that AI workloads will grow at a compound annual growth rate (CAGR) through 2027.

What capabilities does Advanced Micro Devices have? The artificial intelligence market is expected to grow from $780 billion to $990 billion by 2027. Thus, Advanced Micro Devices only needs to capture a small share of the market to possibly double its current annual data center revenue, which could add nearly 50% to the company’s annual revenue. .

With this backdrop, you can begin to understand why Advanced Micro Devices may be undervalued relative to the opportunity ahead of it. This means this could be the ideal time to start averaging out your position to ensure you can catch a strong move higher after the report.

The technical forecast is favorable for traders. AMD shares are trading at a discount to their 50-day moving average and are close to their 52-week low. Additionally, the relative strength indicator (RSI) is around 40, which puts the stock near the oversold range.

The company reports earnings on February 4, and options traders are relatively bullish. The AMD stock options chain as of February 7 shows the highest volume of call options written on AMC stock at $130. This price will bring it closer to the inflection point with the 50-day SMA.