Advanced Micro Devices, Inc. (NASDAQ:AMD) reported Tuesday after the close better-than-expected second-quarter results, but the guidance came in light.
The AMD Analysts:
The AMD Thesis
Stock Looks A Little Stretched, Says Bernstein: The entire stock call now seems to hinge on the uptake of AMD’s AI chip MI300X, said Bernstein’s Rasgon. “At this point while we are sure there is customer interest we have seen no specs or anything that might help to gauge uptake,” he said.
Unless the numbers get “really material” soon, estimates appear to be too high, the analyst said, adding the “stock looks a little stretched to us.”
Susquehanna Bets On Expanding MI300 Opportunity: Data Center revenue is likely to accelerate in the third quarter and inflect higher in the fourth quarter, said Susquehanna analyst Rolland. The analyst expects fourth quarter Data Center revenue to grow more than $600 million sequentially, thanks to “several hundred million” of incremental MI300A revenue shipping into El Capitan and additional shipments into hyperscalers.
El Capitan is an upcoming exa-scale supercomputer from Hewlett-Packard Enterprises, Inc. (NYSE:HPE) and AMD’s AI chips will likely power the machine.
Rolland’s positive opinion is premised primarily on the expanding opportunity for MI300.
Oppenheimer Remains On Sidelines: Delving into the second-quarter results, Oppenheimer analyst Schafer said Client segment led, as PC market emerges from a yearlong cyclical correction. The company shoots for double-digit sequential growth for both Client and Data Center businesses in the third quarter and sequentially lower revenue for the Embedded and Gaming business, the analyst noted.
Enterprise remains weak and cloud service providers favor AI/accelerated compute versus legacy CPU-centric architectures, the analyst said. “We remain sidelined as AMD’s AI strategy proves out,” he added.
KeyBanc Sees AI Chip Ramp-Up In 2024: AMD’s second-quarter results and lower third-quarter guidance underlined the recovery in PCs that was offset by weaker server demand, said KeyBanc’s Vinh. Server chip sales suffered from soft enterprise demand and cannibalization of traditional servers from increased AI spend, he added.
While the company lowered its 2023 Data Center outlook from double-digit growth to high-single-digit growth, it expects a meaningful fourth-quarter ramp, Vinh noted. The fourth-quarter ramp-up, the analyst said, is premised on the continued ramp-up of Genoa/Bergamo, server chip and CPU, respectively, and the ramp of MI300X at SC El Capitan.
KeyBanc slightly reduced its 2023 estimates for AMD but maintained its bullish recommendation on expectations of meaningful MI300X ramp-up in 2024.
AMD Uniquely Positioned: Morgan Stanley: Analyst Moore sees AMD as uniquely positioned with strong AI opportunity that begins in earnest only in 2024. The second quarter should be a significant relief for investors, who were bracing for margin impact from rival Intel Corp’s (NASDAQ:INTC) aggressive pricing and promotion, he said.
This sets up the stock nicely from here, he added.
Better-than-Feared, Says Wells Fargo: AMD’s second-quarter results and forward guidance and the comments on AI engagement and Zen4 cloud expansion are incrementally positive, said analyst Rakers. This is especially so as investor sentiment has either waned or remained cautious, he added.
Citi Concedes It Was Wrong: Citi analyst Danely stated that he previously anticipated AMD’s MI300 would be margin dilutive and investors would be worried about the expensive valuation. “We were wrong on both counts,” he said.
The firm raised its forward estimates for the company.
AMD Price Action: At last check on Wednesday, AMD shares were down 7.4% to $108.82, according to Zenger News Pro data.
Latest Ratings for AMD
Date
Firm
Action
From
To
Feb 2022
Bernstein
Upgrades
Market Perform
Outperform
Feb 2022
Daiwa Capital
Upgrades
Outperform
Buy
Feb 2022
Mizuho
Maintains
Buy
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