AMD's stock has a big catalyst on the horizon. Can it live up to the hype?

By Emily Bary

Last year's Advancing AI event spurred a major rally in AMD shares. Here's what investors are looking for at this year's.

Advanced Micro Devices Inc.'s stock is staring down a big possible catalyst later this week - one that is unlikely to sneak in under the radar the way last year's version did.

The company will hold its Advancing AI event on Thursday, and investors expect a host of product news, including around the new MI325X artificial-intelligence accelerator. Broadly speaking, there could be various announcements on AMD's (AMD) central processing units and graphics processing units, as well as talk about the company's broader software ecosystem.

Can an event like this propel AMD shares higher? Last year's version certainly did. Cantor Fitzgerald's C.J. Muse noted that AMD's stock rose 10% in the session following the event and went on to outperform Nvidia Corp. shares (NVDA) and the broader PHLX Semiconductor Index SOX through the balance of the year.

Read: Yet another bullish call on Nvidia's stock? Don't ignore this one.

"This time around, expectations are more elevated and AMD will need to provide investors with greater confidence in the company's technology roadmap," Muse wrote. "Here, confidence in securing inference design wins at an increasing breadth of customers beyond key customers will likely be the main focus."

There's speculation that Amazon.com Inc. (AMZN) or Alphabet Inc. (GOOG) (GOOGL), or both companies, could give presentations at the event, which would be "a good start," according to Muse. "If [management] can do a good job here, AMD shares should outperform into the day" and likely heading into 2025, he wrote.

As it stands, AMD's stock has lagged Nvidia's big time this year - and it also trails the chip sector as a whole. AMD shares are up 15% on a year-to-date basis, compared with a 155% rise for Nvidia shares and a 24% rally in the PHLX Semiconductor Index.

See also: Nvidia's stock is no longer the S&P 500's top gainer this year. Here's what is.

Muse says investors could react positively to various numbers that AMD's management might share on Thursday. One would be a new estimate for the company's total addressable market in AI, potentially going out to 2030.

Investors are also thinking more near term, though it's unclear if they'll get the answer they're looking for Thursday. In thinking broadly about developments that could spark a rally in AMD shares, Muse said "any help supportive of confidence that AI GPU revenues can grow to $12 billion-plus in [calendar 2025] would support earnings power of $6 or more, which would support stock price likely approaching $200."

He rates the stock a buy with a $180 target price.

AMD's event comes "a little earlier than last year," Melius Research's Ben Reitzes noted. AMD held the 2023 version in December.

Reitzes and his team "expect a well-rounded presentation on the entirety of AMD's AI exposure including PCs, x86 servers and GPUs."

Pay particular attention to Turin server announcements, Reitzes said, as the company has the opportunity to pick up share at the expense of Intel Corp. (INTC). "We believe Turin momentum will sneak up on people in 2025 with hyperscaler and enterprise momentum," he wrote.

See also: Should Qualcomm take over Intel? Why Wall Street isn't sold on a possible deal.

-Emily Bary

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10-07-24 1016ET

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