Why Advanced Micro Devices Stock Jumped This Week
What happened
Shares of Advanced Micro Devices (NASDAQ: AMD) were rising this week as the chipmaker picked up some tailwinds from NVIDIA's (NASDAQ: NVDA) blowout guidance in its earnings report on Wednesday. That signals a surge in demand for AI-related chips, and bodes well for AMD and other AI chipmakers.
Additionally, AMD announced some new products and got a bullish analyst note.
As a result, the stock was up 13.7% for the week as of Thursday's close, according to data from S&P Global Market Intelligence.
So what
Nearly all of AMD's gains came on Thursday in response to NVIDIA's earnings report. The leading GPU (graphics processing unit) maker beat estimates on the top and bottom lines in the first quarter and gave much better guidance than Wall Street had expected in the second quarter, saying that it was ramping up production to match demand for AI chips. NVIDIA now expects revenue to jump 64% in Q2 even as much of the semiconductor sector is still struggling with a downturn.
The market interpreted this as good news for AMD as it also makes GPUs and other products for AI workloads, though NVIDIA's are generally considered more powerful.
AMD reported flat revenue growth in its data-center segment, which would reflect demand for AI chips, and its guidance called for flat sequential growth, indicating it isn't yet seeing the AI boom that NVIDIA is.
Additionally, AMD launched a new lineup of Ryzen and Athlon 7020 C-Series processors, which will go in Google Chromebooks. It also introduced a new Radeon RX 7600 graphics card designed to deliver 1080p gaming experiences.
Finally, Bank of America also raised its price target on the stock from $105 to $120 due to new products expected to roll out at a June 13 event and increasing sector multiples.
Now what
Whether AMD can make the most of the spiking demand for AI chips remains to be seen. The company has steadily gained market share on Intel in the PC market, but NVIDIA could prove to be a tougher competitor. Still, it should get at least some benefit from the AI boom.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Bank of America, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.
