Stocks of AMD jumped over 8% on Tuesday, ending at its highest level since November 2021, as investors bet that tech giants like Google, Microsoft, and OpenAI will increase their demand for the company’s AI chips.
Barclays analyst Tom O’Malley said that AMD may sell $4 billion worth of AI chips this year, which led him to increase his price objective for the company from $120 to $200.
O’Malley, who has a buy recommendation on the stock, stated that the MI300, AMD’s top-tier server machine learning chip, is in great demand. In response to the high demand for AI servers, KeyBanc analysts raised their price targets for AMD to $195 and Nvidia to $740 on Tuesday.
AMD’s stock price was $158.74 at Tuesday’s close, down about 2% from its all-time high. Nvidia rose 3% to $563.82, solidifying its position as the market leader for artificial intelligence chips and the top performer among S&P 500 companies last year.
The H100 and A100 GPUs from Nvidia are utilized by OpenAI for training and serving models like the one underlying ChatGPT. AMD introduced new AI server processors in late 2023 to compete with these GPUs.
Originally developed for high-end video games, graphics processing units (GPUs) are today indispensable for training and running artificial intelligence (AI) models, and the two leading manufacturers of these GPUs are AMD and Nvidia.
Nvidia has reaped the most rewards from the recent uptick in interest in artificial intelligence (AI) applications among investors. The business has been sitting pretty since it created AI software for its chips over a decade ago.
Jim Breyer, a venture capitalist, told CNBC on Tuesday that the companies he invests in just “can’t get enough” of the software layer that has been created around their processor.
According to Breyer, he was “pounding the table” to acquire shares of AMD and Nvidia. Major chip customers, including cloud providers and IT companies, are expected to give serious consideration to utilizing AMD GPUs, according to analysts. AMD is also enhancing its AI software.
“While we do not intend to downplay NVDA’s leadership, we believe that the need for a secondary source will outweigh the challenges faced by the software ecosystem,” O’Malley stated.
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