Advanced Micro Devices (NASDAQ:AMD) investors got what they wanted – and then some – on Monday, in a move that signaled the company is ready to be a significant participant in the AI game. The chipmaker and OpenAI revealed a 6GW deal valued at over $100 billion to supply OpenAI’s next-generation AI infrastructure with multiple generations of AMD Instinct GPUs.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 55% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Given the stock’s 28% surge since the news broke, investors clearly believe the announcement was a huge deal, and so does Morgan Stanley’s Joseph Moore, an analyst ranked among the top 3% on Wall Street, who called it a “major announcement that could have game-changing impact.”
“We have been excited to see what AMD can deliver with its rack scale products, starting with MI450 2h26,” Moore said. “Customers have been similarly interested, but it has been our sense that there is still a bit of a ‘show me’ attitude towards AMD.”
But this OpenAI partnership is something different, as OpenAI appears genuinely invested in AMD’s success. This is significant because AMD’s biggest hurdles are likely to stem from software and ecosystem development rather than hardware. Having the world’s largest AI customer actively supporting AMD could be crucial in turning its platform into a commercial success.
That said, as with the NVDA and AVGO OpenAI projects, Moore views the absolute figures “with a healthy grain of salt.” These initiatives, set to ramp in the second half of 2026 – just when Moore expects industry growth to slow – depend heavily on financing and on less-proven Nvidia alternatives. Still, the analyst thinks it’s “certainly notable” that three of the most credible chip CEOs foresee a major ramp from a single customer. Moore estimates that each gigawatt of AI revenue could add roughly $3 to annual earnings, potentially lifting his prior CY27 adjusted EPS forecast from $6.74 to nearly $10. With the warrant expiring in five years and buildout expected to peak around 2027, multiple gigawatts of concurrent expansion seem likely.
As for the impact on peers, Moore thinks it is “negative at the margin” for Nvidia as AMD gaining a major foothold could enable deeper investment in its ecosystem. Still, this isn’t a new concern, and if OpenAI’s investment scales as projected, Nvidia should still have “substantial upside.” Moore also sees it as a negative for ASIC efforts at AVGO and MRVL, since a more competitive merchant market could discourage spending hundreds of millions on custom silicon that fails to offer clear differentiation.
However, despite the deal’s significance, Moore is not willing to join the AMD bull camp yet.
“Longer term,” the 5-star analyst summed up, “the best ROI still wins, and AMD still needs to prove that they can deliver that vs. NVIDIA who remains the incumbent everywhere.”
For now, Moore stays neutral with an Equal-weight (i.e., Neutral) rating, but his conviction has strengthened enough to lift his price target from $168 to $246, implying ~16% upside in the months ahead. (To watch Moore’s track record, click here)
11 other analysts also prefer sitting AMD out for now, but with an additional 23 Buys, the stock claims a Moderate Buy consensus rating. The shares are expected to climb another 8% considering the average price target stands at $228.91. (See AMD stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.