AMD Stock: Upcoming AI Event May Serve as a Catch-Up Catalyst, According to BofA

Bank of America (BofA) analysts have maintained a Buy rating for AMD ahead of the company’s “Advancing AI” event scheduled for October 10. The analysts noted that AMD’s previous AI event on December 6 resulted in notable stock increases of 19% and 80% over the following one and three months, significantly outpacing the Philadelphia Semiconductor Index, which saw gains of 10% and 37% during the same periods.

The upcoming event is anticipated to showcase updates related to AI and server CPUs, as well as insights from cloud customers. This could potentially rejuvenate AMD’s stock, which has experienced a modest year-to-date increase of 9%, contrasting with the Semiconductor Index’s 22% rise.

In a landscape increasingly populated with competitors in AI accelerators, BofA mentioned that AMD has the opportunity to enhance its market share. Current market projections estimate AMD’s AI sales to reach $5.1 billion in 2024, with the possibility of doubling to $10 billion in 2025.

Forecasts for AMD’s AI sales from 2024 to 2026 are $5.1 billion, $9.7 billion, and $12.8 billion, indicating that the company’s market share in accelerators is likely to remain within a range of 5% to 7%, which is substantially lower than its 20%+ share in consumer CPUs and gaming GPUs.

Although AMD has made a strong beginning, BofA warned that further increasing its share could be difficult due to NVIDIA’s commanding 80-85%+ market share and its robust position in the cloud, along with competition from cost-optimized custom ASICs from firms like Broadcom and Marvell.

Nevertheless, if AMD can show a viable strategy for capturing over 10% of the AI market share by 2026, it could potentially add about $5 billion to its revenues, translating to earnings per share of approximately $8 to $9, compared to the consensus estimate of $7.37.

BofA analysts added that accelerated growth could lead AMD to achieve a forward price-to-earnings ratio of 30-55x, similar to levels seen during previous periods of rapid market share gains and over 40% annual sales growth.

Furthermore, the analysts expect AMD to highlight its enhanced positioning through recent acquisitions, open-source software developments, and networking advancements during the upcoming event. They also reflected on broader issues affecting AMD’s stock performance, including competition from Intel, weakened PC demand, increasing competition from ARM-based servers and CPUs, challenges in raising prices for AI silicon, and the recovery pace of non-AI embedded and gaming markets—categories critical to AMD that account for 20-25% of its sales and are regarded as both profitable and cyclical.