Modern micro devices (NASDAQ:AMD) The stock has soared since the start of the year thanks to the AI (artificial intelligence)-powered rally. However, management left its 2024 forecast unchanged despite the acceleration of AI capabilities. This is a cause for concern and suggests that an AI-fueled rally could be losing steam.
But before we delve deeper, let’s look at AMD’s AI opportunities.
AMD – The AI opportunity
According to Lisa Su, the company’s CEO, AI represents a multi-billion dollar growth opportunity for AMD. Additionally, the company recently launched the MI300X accelerator, its AI offering, to compete with Nvidia (NASDAQ:NVDA). In addition to these positives, the company announced at its Advancing AI event on Wednesday that top companies like Microsoft (NASDAQ: MSFT), metaplatforms (NASDAQ:META), Dell Technologies (NYSE:DELL) and other renowned players have adopted the new AMD Instinct MI300X and MI300A data center AI accelerators for training and inference solutions.
Additionally, Su added that while AI offers many growth opportunities, the data center accelerator TAM (Total Addressable Market) is expected to grow from the initial forecast of $150 billion to over $400 billion by 2027, an annual rate of more than corresponds to 70%. All of these points suggest that AMD stock will benefit from AI-related tailwinds.
The concerns surrounding AMD stock
While the outlook for AI TAM has increased, AMD management has left its data center GPU sales forecast for 2024 unchanged, raising concerns. Speaking at the Barclays Global Technology Conference on December 7, AMD CFO Jean Hu reiterated the previous forecast and expects data center GPU sales to exceed $2 billion in 2024.
Vijay Rakesh, analyst at Mizuho Securities, emphasized the same and said, “There is some concern among investors that AMD will not raise its AI or overall outlook for 2024 despite the higher TAM.” Nevertheless, Rakesh maintained his buy rating on the stock on December 6 AMD shares. However, its $130 price target suggests limited upside of 1.27% from current levels.
What is the forecast for AMD shares?
Wall Street analysts are cautiously optimistic about AMD stock. With 25 Buy and nine Hold recommendations, AMD stock has a consensus rating of Moderate Buy. Additionally, AMD stock’s average price target of $129.45 implies an upside potential of 0.84% from current levels.
The unchanged forecast for 2024 despite rising TAM, the short-term weakness in the gaming and embedded segments and the significant increase in the share price could limit the upside potential of AMD shares. This is reflected in the analysts’ average price target.