“A strong year is just around the corner,” says top analyst about AMD shares

Advanced Micro Devices (NASDAQ:AMD) is underperforming this year with shares down 13% year-to-date. As rival chipmakers take the AI ​​boom to new heights, AMD is left in the dust.

For a company that is often touted as a serious challenger Nvidia (NASDAQ:NVDA) In the AI ​​chip game, this underperformance could come as a surprise.

However, the market’s current attitude suggests skepticism about AMD’s ability to pose a serious threat. However, Northland analyst Gus Richard doesn’t buy that narrative. He sees better days ahead for the company led by Lisa Su.

“We expect CY25 to be a strong year for AMD as the company continues to gain market share in AI GPUs, server CPUs and PC clients and embedded and gaming headwinds ease.” AMD wins based on its roadmap and TCO (total cost of ownership) market share in AI,” said Richard, who ranks in the top 2% of Wall Street equity experts.

The 5-star analyst expects AI revenue of $9.5 billion in FY25, with the first half of FY25 recording a 7% increase over the second half of FY24. Since AMD plans to ramp up its MI325X accelerators in the first half of the year, Richard argues that this is a conservative estimate and believes the GPU can stand up to Nvidia’s H200. Additionally, AMD appears to be strategically pricing its product to gain scale. The margins are below the company’s average non-GAAP gross margin of 54%, compared to Nvidia’s estimated data GPU gross margin of 85%.

While AMD keeps an eye on Nvidia’s dominance in AI chips, the company has been undermining Intel’s dominance in server and client CPUs for several years now, and here Richard believes AMD will “continue to capture market share” simply because its products are better.

The analyst also expects the PC refresh cycle “will likely be much stronger than we predicted” as Microsoft ends support for Windows 10, which runs on an estimated 1.2 billion systems. Richard estimates that about 40% of these systems (or 480 million units) will be replaced in the next 18 months. So for FY25, Richard forecasts customer revenue of $7.9 billion, up 15% year-over-year. “We believe customer revenue could easily be $1 billion to $2 billion above our estimate of $7.9 billion if the replacement cycle proceeds as expected and AMD maintains its market share,” the analyst continued.

Looking further ahead, there is more good news as Richard also believes that “the trends that unfolded in FY25 will continue in FY26.”

Given these optimistic forecasts, Richard rates AMD stock an Outperform (i.e. Buy) and sets a price target of $175, implying an upside of approximately 34% from current levels. (To view Richard’s track record, click here)

The Street’s average price target is slightly higher; At $184.33, this value has room for a 12-month return of 44%. As for valuation, the analyst consensus rates the stock as a Moderate Buy based on a mix of 22 Buys vs. 8 Holds. (See AMD stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before investing.