AMD supplants Nvidia as this analyst's top chip stock - but he still likes both

By Emily Bary

AMD's stock advances as Wolfe Research writes positively of company's AI traction

Step aside, Nvidia Corp. Wolfe Research has a new preferred chip stock.

To be sure, Wolfe analyst Chris Caso still likes shares of Nvidia (NVDA) plenty, but he's now making "a tactical shift in priority" by adding Advanced Micro Devices Inc.'s (AMD) stock to Wolfe's Alpha List, which is its collection of "high-conviction" picks that could show meaningful outperformance over a 12-month span.

"We think AMD's memory issues were largely transitory and now appear to be resolved," Caso wrote. Prior to earnings, analysts had been concerned about memory-supply limitations for AMD.

Caso is also encouraged about AMD's commentary around its MI300 artificial-intelligence accelerator product.

"Recall that AMD raised AI/MI300 [calendar 2024] revenue guidance to $4.0 billion on their [first-quarter] earnings call, and suggested that guidance remained conservative, and that they were securing capacity well in excess of guidance," he noted. "We think the meaningful MI300 guidance increase so soon after launch demonstrated significant traction, with a path to significantly higher numbers" for calendar 2025.

Read: Here's what Nvidia earnings need to show to be 'good enough' for Wall Street

AMD shares are up 4.4% in Thursday afternoon trading, and they're up nearly 11% over the past three sessions.

"We believe the premium multiple is warranted given that AMD has clearly earned a seat at the AI table," Caso wrote. His $210 price target is based on a 35-times multiple of price to estimated 2025 earnings per share.

Caso noted that while he likes both AMD and Nvidia shares, his switch to the Alpha List reflects the relative performance of the stocks recently. Nvidia shares are up about 90% so far this year, and they had roughly doubled since Caso added them to the list last November. AMD shares, by contrast, are up 13%, factoring in the intraday gains.

"We do expect more significant catalysts for NVDA later this year as more capacity becomes available and as Blackwell begins to ship - and we expect numbers to move higher for both NVDA and AMD," Caso wrote.

Read: Intel's stock has fallen far enough, this analyst says

-Emily Bary

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05-16-24 1259ET

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