Shares of Advanced Micro Devices (NASDAQ:AMD) experienced an 8% surge, driven by an optimistic AI chip sales forecast that indicates the company is making significant strides in its efforts to compete with market leader Nvidia.
The positive outlook for AI chip sales helped alleviate concerns regarding a lackluster fourth-quarter forecast and positioned AMD for potential market value gains approaching $13 billion, based on the current share price of $106.41.
AMD’s CEO, Lisa Su, recently provided a 2024 sales forecast for the MI300 chips, designed to rival Nvidia’s advanced H100 chips. She projected annual sales of over $2 billion and raised the chip’s revenue expectations for the current quarter by $100 million. If achieved, this would mark the MI300 as the fastest product to reach $1 billion in sales in AMD’s history.
Analysts at TD Cowen commented that reaching this milestone is likely a crucial initial step in establishing AMD as the primary alternative to Nvidia in the AI accelerator market. Furthermore, CEO Lisa Su revealed that the MI300 chips had secured commitments from “multiple, large hyperscale customers,” referring to significant tech and cloud computing companies.
While AMD’s shares have seen a 61% increase in value this year, this performance pales compared to Nvidia’s remarkable 184% rally. However, despite the conservative forecast and challenges in some of AMD’s markets, including a weak gaming sector and declining demand for programmable chips used in wireless communications, healthcare, and automotive industries, at least 18 analysts have lowered their price targets for AMD stock, resulting in a median view of $130, as per LSEG data.
Morningstar analyst Brian Colello noted that the forecasts fell below their previous estimates but also suggested that these estimates could potentially be conservative. While the PC market shows signs of recovery, certain challenges persist in other sectors, impacting AMD’s overall performance.
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