Why AMD Stock Jumped 30% in September

Shares of Advanced Micro Devices (NASDAQ:AMD) were among the winners last month after the diversified, fabless chip company rode a surge in CPU stocks following the launch of Meta Platforms' new Muse personal AI agent. AMD also announced an acquisition and benefited from some positive analyst commentary.

As a result, the stock finished the month up 30% according to data from S&P Global Market Intelligence.

As you can see from the chart below, most of the stock's gain came in the middle of the month as the market reacted to Muse.

AMD data by YCharts

Is CPU demand about to soar?

CPU stocks, including AMD, Arm, and Intel, all soared in the middle of September on signs that Muse could become the next blockbuster product in AI. AI agents like Muse rely on the computing power of CPUs, so the companies that make them, like AMD, Intel, and Arm, all moved higher.

In less than a month, Muse has been downloaded 5 million times, and it's become the most downloaded app on the App Store and Google Play. It's also received rave reviews, showing that AI agents could be the next wave of AI, potentially driving a surge in demand for CPUs.

The other major news out on the company was its acquisition of World Labs at the end of the month for $8.2 billion in stock. World Labs is an AI model and research lab that will bring a team of researchers and model experts to AMD, helping it develop AI hardware, software, and systems. The all-stock deal is also a smart way for AMD to take advantage of its elevated stock price.

A number of Wall Street analysts also raised their price targets and upgraded the stock in the quarter, citing increasing demand for AI compute and the expansion of the CPU market from AI agents.

Image source: Advanced Micro Devices.

What's next for AMD

AMD is now a trillion-dollar company, and it has been one of the biggest winners since the stock market dip in March, as the stock has tripled since then.

AMD is one of the most diversified chip companies on the market with strong positions in both CPUs and GPUs, giving it multiple ways of capitalizing on the AI boom. It's the #2 maker of PC and server CPUs and the #2 player in the GPU market.

While significant profit growth is now priced into the stock, the business is accelerating, and it's poised to capitalize on increasing demand for CPUs.

Jeremy Bowman has positions in Advanced Micro Devices, Arm Holdings, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Arm Holdings, Intel, and Meta Platforms. The Motley Fool has a disclosure policy.