Semiconductor company Advanced Micro Devices (NASDAQ:AMD) raised its 2024 Data Center GPU (Graphics Processing Unit) revenue outlook to over $3.5 billion from $2 billion. This substantial upward adjustment in guidance reflects a significant boost from Artificial Intelligence (AI)-led demand. Despite the positive impact of AI, AMD stock experienced a decline of approximately 6.5% during the after-hours of trading on Tuesday.
The decline in its share price may be attributed to the continued challenges in its Embedded and Gaming segments. Moreover, investors were not pleased with the company’s lower-than-expected Q1 2024 revenue forecast. AMD expects to deliver revenue of $5.4 billion in Q1 (+/-$300 million) compared to analysts’ projections of $5.73 billion.
The strong growth in the company’s Data Center and Client segments is expected to be offset by declines in the Embedded and Gaming divisions. This could limit the upside potential of AMD stock in 2024.
Against this backdrop, let’s look at the Street’s forecast for AMD stock.
Is AMD a Buy, Sell, or Hold?
AI offers a multi-billion-dollar growth opportunity for the company, according to its CEO, Lisa Su. Notably, its Data Center GPU business is growing rapidly, driven by a faster ramp for MI300X with AI customers. It’s noteworthy that AMD recently launched the MI300X accelerator, a product to compete with Nvidia (NASDAQ:NVDA).
However, the upside in AMD stock remains capped, given the significant increase in its value (AMD stock is up about 129% in one year) and ongoing challenges in the Embedded and Gaming segments.
Thanks to the AI demand, AMD stock has a Strong Buy consensus rating, reflecting 28 Buys and eight Holds. However, analysts’ average price target of $165.65 implies 3.73% downside potential from current levels.
