Advanced Micro Devices Inc. went against the grain this past week as shares not only outperformed AI-rivals like Nvidia Corp. on Friday, but finished the week higher when the rest of the sector sold off.
AMD AMD, +2.36% shares rose 2.4% Friday to close at $115.82, or for a 2.6% gain on week, while Nvidia NVDA, +0.37% shares gained 0.4% on the day to close at $446.80, but finished at a loss of 4.4% on the week. In comparison, the PHLX Semiconductor Index SOX declined 0.2% Friday for a 4% weekly drop. Nvidia reports its earnings after the market close on Aug. 23.
Tech stocks had a rough midweek, their recent outsized gains becoming outsized losses with respect to the broader market, after Fitch Ratings cut its top U.S. credit rating to AA+ from AAA late Tuesday.
High flyers like Nvidia, with its more than 200% gains on the year, and chip-related stocks — with the SOX index’s more than 45% rally — all fell sharply on Wednesday. That move included a drop for AMD shares, which had been on the rise after hours Tuesday following an earnings beat.
But while that blow left the rest of the sector dazed for the rest of the week, and some analysts questioned if the chip maker’s expectations were too high, a wave of analyst support for AMD followed, and turned it into one of the week’s few winning chip stocks.
Following Benchmark analyst Cody Acree calling AMD “among the best positioned companies” to take advantage of AI, Morgan Stanley analyst Joseph Moore, in a Thursday-dated note released to non-clients Friday, said the “post quarter selloff” of AMD “creates an important buying opportunity.”
Moore has an overweight rating on AMD and a $138 price target.
“The AMD quarter should have been a relief, given near universal sentiment that they would guide well below expectations for servers (they didn’t), and that their expectation for margin recovery in PCs was unrealistic (it wasn’t),” Moore said in the note.
Other chip makers like Qualcomm Inc. QCOM, +2.36% didn’t have it as easy, with shares finishing the week down 6.2%, after the phone handset supplier reported it was still dealing with inventory drawdowns.
In the coveted AI data-center category, Moore said interest in AMD’s rollout of MI300 class CPU + GPUs is high.
“Substantial demand from customers is known, but the timing of qualifications remains a key variable,” Moore said. “There will be inevitably be surprises
when bringing up new silicon.”
“There will also be a competitive reaction to first silicon; for example, we don’t think that Nvidia will price inference products aggressively to compete with powerpoint presentations about chips that aren’t out, but they will be fully engaged when AMD is trying to convert initial interest into wins,” Moore wrote.
“The supply chain is building to the best case, and this is a chip with the longest
manufacturing lead times that we have ever seen, at 8 months or so, in a market
where customer interest is the highest we have ever seen,” the Morgan Stanley analyst noted.
Of the 45 analysts surveyed by FactSet, 30 have buy ratings, and 15 have hold ratings, along with an average price target of $140.42.