Advanced Micro Devices (NASDAQ:AMD) delivered a third-quarter report that gave bulls plenty to be optimistic about, with the company appearing well-positioned to capture a larger share of the AI chip market.
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It was a classic beat-and-raise quarter, featuring solid revenue growth across most product lines. Following its recent collaboration announcement with OpenAI, AMD projected confidence in its expanding role within the AI data center ecosystem. Profitability also improved, as margins resumed their upward trajectory after last quarter’s export-related write-downs. Meanwhile, data center revenue hit a record high – a key milestone for the company – as AMD once again outpaced Intel in market share.
Still, Seaport analyst Jay Goldberg was left somewhat underwhelmed.
While AMD’s data center segment showed robust growth, much of that strength stemmed from CPU sales, rather than GPU momentum. The company continues to take share from Intel, not Nvidia. “With the OpenAI announcement, the distinction is important as Instinct sales do not become meaningful until 2H26,” Goldberg noted.
Although margins improved sequentially, Goldberg pointed out that they simply reverted to levels seen earlier in the year. The analyst remains cautious about the timing of any “meaningful improvement,” citing potential headwinds next year from higher input costs, including increased TSMC pricing and expenses tied to ramping the MI400. As a result, he expects gross margins to hover around current levels.
“While the company has been able to raise prices for CPUs, prices – and thus margins – for Instinct, will remain pressured for the foreseeable future,” the analyst went on to add.
Operating expenses also remain high, driven by continued investment in the Instinct line. While AMD could moderate spending next year, Goldberg said that too “remains uncertain.”
Beyond OpenAI, visibility into AI demand is limited. Channel checks suggest only modest uptake from hyperscaler trials of Instinct, prompting Goldberg to take a more cautious stance. Although AMD is well-positioned with OpenAI and Oracle, the long-term success of Instinct will hinge on broader customer adoption. On a positive note, AMD appears to be gaining traction with enterprise clients and expanding its neocloud customer base.
But that is not enough for the analyst to become an AMD bull.
“Overall,” Goldberg summed up, “we think the company is executing well, but continues to operate in a very competitive market. The stock is heavily dependent on the prospects for their AI products, but ultimate demand for those remains unclear.”
Accordingly, Goldberg assigns AMD shares a Neutral rating without specifying a price target. (To watch Goldberg’s track record, click here)
As for the broader Street, sentiment is more constructive. The consensus rating sits at Moderate Buy, based on 27 Buys and 10 Holds, with an average price target of $278.09, implying potential upside of 19% from current levels. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.