AMD breaks through against the wind with better-than-expected performance, Wall Street debates the bullish and bearish views on AI growth prospects
AMD's quarterly performance exceeded expectations, and despite facing challenges from China's export controls, Wall Street analysts remain optimistic about its prospects. Morgan Stanley analysts noted that AI and traditional server businesses performed well, but they were surprised by the stock price pullback, maintaining a "hold" rating and lowering the target price to $121. Jefferies analysts also emphasized that AI growth is a key indicator, and if it falls short of expectations, it will impact performance in the second half of the year. Overall, while AMD shows solid performance in other areas, there remains uncertainty regarding the prospects of its AI business
According to Zhitong Finance APP, despite the ongoing challenges posed by new export control measures involving China, AMD's (AMD.US) quarterly performance and outlook have been recognized by multiple Wall Street institutions.
Previously, AMD's management indicated that the performance guidance included an estimated revenue loss of approximately $700 million due to export controls, with total losses expected to reach $1.5 billion in the fiscal year 2025.
Morgan Stanley analyst Joseph Moore noted in a report: "AMD's data is very impressive. While some question the strength of the client business amid concerns about demand front-loading, the AI and traditional server businesses are more decisive—and both segments performed excellently."
He added that he was surprised by the stock price retreat, emphasizing that although AI has not yet translated into substantial profits, it has already driven up valuation multiples, and "insufficient visibility" remains a risk. Morgan Stanley maintains a "Hold" rating but lowers the target price from $149 to $121 to reflect the contraction in profit multiples.
"In contrast to current market sentiment, we still believe that AI hardware is in a strong investment cycle," Moore analyzed, "but in the fiercely competitive landscape with NVIDIA and ASIC manufacturers, AMD needs to launch a sufficiently powerful MI400 product line next year to solidify its position. Although AMD has a solid advantage in other areas due to Intel's market turmoil, the outlook for the AI business remains uncertain."
Jefferies analyst Brian Curtis shares a similar view, pointing out that AI growth is the "core metric," and if it falls short of expectations, it could impact performance in the second half of the year. "The Chinese ban is indeed a headwind, but it was initially seen as a potential benefit. Now, the annual growth rate of AI revenue has become unclear," Curtis wrote, "despite the client and server businesses exceeding expectations, market share is flowing back to Intel. Overall upward revisions may be seen as a temporary benefit under low baselines, but AI growth expectations are being downgraded. Considering that the release of MI350 has not yet shown substantial progress for ramping up in the second half of 2025, this may not be the last downward revision of expectations."
Evercore ISI analyst Mark Lipacis is more optimistic, reaffirming the "Outperform" rating and a target price of $126 after the earnings report. "AMD's guidance for a more than 60% quarter-over-quarter growth in its data center GPU business (Instinct) to $1.6 billion, and maintaining double-digit growth in 2025, aligns with our industry chain research—due to a shortage of accelerator supply and improvements in the ROCm software stack, supercomputing centers are deploying Instinct chips to handle inference workloads; in the long term, supercomputing operators hope to expand AMD's share of internal workloads."
Wells Fargo analyst Aaron Rakes also maintains an "Overweight" rating, believing the company needs to first digest the first-quarter performance and next-quarter guidance (especially the impact of the MI308X ban in China) "to outline a clearer growth path for investors in the mid/second half of 2025."
