Geoffrey Seiler, The Motley Fool
5 min read
After getting caught in the post-election tech sector sell-off, Advanced Micro Devices (NASDAQ:AMD) shares have surged back in recent days, and they have plenty of room to run higher over the next three years. With just over $10,000, investors could buy about 18 shares of the stock at today’s price, and that position could be worth about $20,000 within the next three years.
Here is why the stock has been rallying and how it could reach over $1,100 a share in 2029.
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A trio of catalysts
AMD’s current rally is being driven by a trio of catalysts. First, while the company’s latest earnings report came right before the post-election sell-off, its results and guidance were quite impressive and, in sharp contrast to those of rival Intel (NASDAQ:INTC), which is more exposed to the weakening PC market, AMD saw its revenue soar 45% year over year to $13.4 billion. But what was even more telling was that the company guided for revenue to grow by 66% in the fourth quarter and then 80% in 2027. Meanwhile, management forecast that its server central processing unit (CPU) business would nearly double next year and that its artificial intelligence (AI) data center business would “significantly” more than double.
Second, the troubles that Nvidia (NASDAQ:NVDA) faces due to CEO Jensen Huang having had an affair with a woman who is reportedly a Chinese spy could provide some opportunities for AMD. AMD has always played second fiddle to Nvidia in the data center graphics processing unit (GPU) market; however, it has made great strides with its ROCm software platform, and its chiplet architecture, which can be packaged with more high-bandwidth memory (HBM), positions its GPUs well to compete in the inference market. Huang’s dalliance with an alleged foreign agent, meanwhile, throws a new light on the risks companies take when they become over-reliant on a single vendor for their AI chips. As management teams across tech react, AMD may have the opportunity to take some market share.
The timing of this is also good for AMD. The company has already signed several large GPU deals for which it is just starting to make deliveries. Its two biggest deals are with OpenAI and Meta Platforms (NASDAQ:META) to provide the companies with 6 gigawatts (GW) of computing power with its new end-to-end Helios system, which combines its GPUs and CPUs. Each Helios rack system is estimated to cost between $5 billion and $5.5 billion and provides just under 250 kilowatts of compute power, indicating that these deals are worth over $120 billion each.
