It’s safe to assume that even some of the best stock pickers have made terrible investing decisions. Whether it be leaning too heavily into a stock that turned out to be a dud or deciding not to invest in a name, only to watch it surge ahead – it’s only natural for even the best in the game to take a wrong turn occasionally.
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But life is all about lessons, and it’s often necessary to reevaluate a position. With this in mind, Northland analyst Gus Richard says he has been doing some thinking regarding one outperforming name.
“The only thing worse than being wrong is not admitting it,” says the 5-star analyst, “and we have been wrong on Advanced Micro Devices (NASDAQ:AMD) shares. While there is a risk, we are upgrading too late, we think AMD shares will get an AI multiple.”
Accordingly, Richard has now upgraded his AMD rating from Market Perform (i.e., Neutral) to Outperform (i.e., Buy). Additionally, the price target rises from $81 to $150, suggesting the shares have room for upside of 31% from current levels. (To watch Richard’s track record, click here)
It’s no secret Nvidia is the current undisputed GPU leader. In fact, the gap has only widened in recent years. Recall, AMD acquired ATI in 2005 to compete on the GPU front but having held a 40% market share in add-in graphics cards around 2010, that has declined to 18% in 2022, with AMD ultimately deciding to focus elsewhere. It’s a strategy that has worked, as in the meantime, AMD has eaten away at Intel’s CPU dominance.
While Richard does not see anyone making a serious lunge for Nvidia’s GPU throne, that doesn’t mean there isn’t market share to gain. Richard points to the advantage Nvidia has with CUDA, its closed-source parallel computing platform and API used for general-purpose computing on GPUs. This provides it with a “significant moat.” AMD, on the other hand, has gone for an open-source approach to software, and Richard believes this could potentially “drain some” CUDA moat. “Also,” he goes on to add, “for no other reason than the world needs a second source to NVDA, we think AMD can reach a 20% market share in the AI GPU market over time.”
Additionally, over time, with AI training costs racking up, other than “throwing more GPUs at the problem,” Richard anticipates the industry will discover different ways to lower the amount of computing, cost, and power needed to build AGI – artificial general intelligence.
And here, AMD is nicely positioned. “We believe AMD has the broadest AI IP portfolio that includes GPU, CPUs, FPGAs, and ASICs will also be used for AI workloads,” Richard opined.
On the Street, most analysts agree with Richard’s stance, although some remain on the sidelines for now. The stock claims a Moderate Buy consensus rating, based on 21 Buys and 8 Holds. At $134.31, the average target suggests shares will climb 17% higher over the coming months. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
