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AMD Stock Leaps After KeyBanc Overweight Rating Upgrade, Price Target Boost

Data center demand, blue-chip clients and the $35 billion takeover of Xilinx should drive meaningful gains for AMD this year, KeyBanc analysts said Tuesday.

Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report shares jumped higher Tuesday after analysts at KeyBanc boosted their rating and price target for the chipmaker, citing growth in data center demand and the impact of its $35 billion takeover of Xilinx  (XLNX) - Get Xilinx, Inc. Report.

KeyBanc Capital Markets analyst John Vinh lifted his rating on AMD to 'overweight', with a price target of $155 per share, on the basis that demand for its data center chips should "meaningfully outpace" growth in the broader industry, particularly given the links to flexible CSP contracts with tech giants Microsoft  (MSFT) - Get Microsoft Corporation Report and Meta  (MVRS) - Get Meta Report

AMD's pending takeover of Xilinx, which it expects to complete by the end of the current quarter, will add a new dimension of programable FPGA semiconductors to the chipmaker's arsenal, Vinh noted, which will "position it well for the long-term transition to heterogeneous compute architectures."

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"We view AMD as one of the most compelling server growth stories in the semiconductor industry, given its outsized exposure to CSPs vs. enterprise," said KeyBanc's Vinh. "Additionally, we expect AMD to significantly outpace cloud industry growth in 2022 of high teens, as we expect continued market share gains."  

AMD shares were marked 1.5% higher in early trading Tuesday to change hands at $134.00 each, a move that would extend the stock's six-month gain to around 47.75%.

AMD landed its deal with Meta Platforms, the parent company of Facebook, in November of last year, alongside the unveiling of a new machine learning and artificial intelligence chip known as MI200, designed to challenge the dominance of market leader Nvidia's  (NVDA) - Get NVIDIA Corporation Report A100.

"We expect GPU compute, which is still very nascent, to represent a meaningful growth opportunity given the increasing shift to accelerated computing," Vinh wrote. "While Nivdia is likely to remain dominant in gaming graphics, we see secular growth related to the gaming industry and the opportunity for AMD to continue to gain incremental share."