Advanced Micro Devices could have a bumpy couple of quarters, but there is a long-term reason to be optimistic about the stock: the potential for its artificial intelligence chips.
AMD
(ticker: AMD) reports its second-quarter results after the close of trading on Tuesday.
Susquehanna analyst Christopher Rolland is telling AMD investors to appreciate the chip maker’s long-term opportunities in AI chips even as he warns of near-term “headwinds.”
The Wall Street consensus estimate is that AMD will report revenue of $5.3 billion with adjusted earnings per share of 57 cents for the June quarter. Analysts’ estimates for the current quarter are for $5.8 billion in revenue and EPS of 73 cents.
On Monday, Rolland reaffirmed his Positive rating on AMD stock, but lowered his target for the stock price to $135 from $145.
“AMD faces a number of near-term headwinds and an elevated DC [data center] expectation, putting Street estimates at risk,” he wrote. “However, longer term we love the server gain and MI300 [next AI chip] opportunities.”
AMD and Intel use the x86 chip architecture in making the processors that act as the main computing brains for PCs and servers.
The analyst noted Intel’s muted outlook for its data center business for the September quarter, citing inventory issues, a lackluster rebound in China and weak demand from enterprises. He also expects AMD’s gaming console segment to slow later this year.
“We note risks to the 2H [second half] guide as the bar was set high, and checks suggest something less than perfection,” he wrote.
But Rolland still believes shareholders should focus on AMD’s prospects in the AI semiconductor area, sparked by the launch of its MI300 near the end of this year.
MI300 is AMD’s coming data center graphics processing unit. It will be suited for AI projects and is scheduled for release later this year.
Write to Tae Kim at [email protected]
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