Why Jefferies Sees AMD Rising 40%

Advanced Micro Devices Inc. (NASDAQ: AMD) has been absolutely explosive over the past year, with shares more than doubling in this time. Some might think the run is over, or that shares might slow down after a rally like this, but one analyst is continuing to take a bullish stance on the stock. In fact Jefferies sees this stock rising by another 40%.

Jefferies issued a Buy rating for the stock with a $19 price target, implying an upside of 38% from the most recent closing price $13.74. The brokerage firm ultimately believes that AMD is poised to take share in x86 MPUs. Jefferies listed a few other reasons:

  • A positive AMD EPYC server MPU benchmark
  • A CNBC report of a deal between Tesla and AMD for AI chips
  • A Digitimes report of a delay of Intel’s 10nm Notebook MPUs.

ServeTheHome, a third-party benchmarking website, recently reported benchmarks and a positive review of AMD’s EPYC 7351P single socket CPU. The site said “…[AMD’s] mainstream offerings are competing with de-featured [Intel] Xeon Silver CPUs and absolutely obliterate what Intel is offering.” This review is consistent with checks that five hyperscale cloud players are interested in AMD’s EPYC Server MPU.

On Wednesday, CNBC reported that Tesla Inc. (NASDAQ: TSLA) is working with AMD to refine an AI chip for autonomous driving tasks in its cars, and that Tesla had received the first samples and was running tests on this chip. So while not substantiated, a partnership between Tesla and AMD would make sense, considering former chief AMD MPU architect, Jim Keller (designer of AMD’s current Zen architecture), left AMD to become Tesla’s head of Autopilot in early 2016.

Separately on Wednesday morning, Digitimes reported that Intel Corp. (NASDAQ: INTC) had rescheduled the release of its 10nm Cannon Lake notebook processors to the end of 2018. Originally, Cannon Lake was expected in 2017, but most recently mid-2018. Jefferies thinks that this creates a window of opportunity for AMD to ship its “Raven Ridge” version of its Zen architecture in notebook MPUs.

Shares of AMD were last seen at $13.75, with a consensus analyst price target of $14.23 and a 52-week range of $6.22 to $15.65.