Why AMD Stock Blasted 5% Higher on Tuesday
What happened
Tech companies involved in, or associated with, artificial intelligence (AI) are having quite a moment on the stock exchange. One of them, storied chipmaker American Micro Devices (NASDAQ: AMD), enjoyed quite the pleasant lift on Tuesday. An analyst boosted the company's already-convincing buy case, and the share price closed more than 5% higher in response.
So what
That analyst was Piper Sandler's Harsh Kumar, who before market open raised his price target on AMD stock. Kumar now feels the tech company is worth $150 per share, well up from his previous $110 level. Almost needless to say, given the heft of the increase, he maintained his existing overweight (read: buy) recommendation.
The Piper Sandler prognosticator's move deepens the bullishness many investment professionals are expressing on the stock. It's far from the only price target hike in recent days -- for example on Monday, Kumar's peer Christopher Danely at Citigroup also enacted a significant raise, setting a new level of $120 per share from his preceding $85. Danely, however, still only rates AMD a neutral.
Investors have been particularly keen on AMD since early May, when a Bloomberg article citing "people with knowledge of the situation" stated that the company is a hardware and engineering partner of Microsoft. The software giant is considered a leading AI stock these days due to its heavy investment in OpenAI, the developer of the ChatGPT app.
Now what
It's easy to get caught up in the AI hype and to follow the recommendations of eager analysts. And while AMD as a company has many positive qualities, we should exercise caution here -- often, even the best businesses can't live up to inflated expectations when they become trendy. Potential buyer, beware and be careful.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Microsoft. The Motley Fool has a disclosure policy.
