Despite not being as dominant as Nvidia (NVDA) in the AI chip market, analysts see significant growth potential for AMD (AMD, Financial) in the AI sector. According to Melius Research analyst Ben Reitzes, AMD's fundamentals have improved significantly this year, with its stock not yet fully reflecting its growth potential. Reitzes upgraded AMD's stock rating to "buy" and increased the price target from $110 to $175. This led to a 1.04% increase in AMD's stock, closing at $129.58.
Nvidia currently holds about 90% of the AI chip market, especially in AI training models. However, Reitzes believes AMD could achieve breakthroughs in AI inference applications. Following the release of its Instinct MI350 series AI chips, AMD's stock has risen 16% in the past month, fueled by positive market reception of these new processors. The MI350 series, including MI350X and MI355X, claims to deliver four times the performance of its predecessor, MI300X.
Reitzes projects that AMD could capture 5% of the AI accelerator market with the MI350 series, pushing GPU sales beyond $20 billion by 2028, with earnings per share potentially exceeding $9. He noted improvements in memory bandwidth, capacity, and ROCm software as reasons for AMD's GPUs being a viable alternative in the inference domain.
In the Middle East, AMD's partnership with UAE's AI startup Humain is seen as crucial. The collaboration aims to deploy 500 MW of AI computing capacity over the next five years. Reitzes suggests that AMD's market share in the region could surpass the global average, estimating that each 1GW of AI computing capacity could generate billions in revenue for AMD. Additionally, AMD's GPU sales forecast for this year was raised from $6 billion to $6.6 billion, with future projections increasing through 2027, reflecting strong growth expectations for AI hardware.
