Why Advanced Micro Devices Stock Popped Today
Key Points
KeyBanc analyst John Vinh upgraded AMD stock to overweight today.
Vinh sees AI chips making up one-third of AMD's revenue in 2026.
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Advanced Micro Devices (NASDAQ: AMD) stock jumped 5.7% through 10:10 a.m. ET Tuesday after KeyBanc analyst John Vinh upgraded AMD to "overweight" and assigned the semiconductor stock a $270 price target.
AMD costs about $220 after today's price surge -- implying there's still another 23% potential profit remaining.
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Why KeyBank loves AMD stock
KeyBanc had downgraded AMD stock to sector weight (i.e., hold) in April, citing concerns "there would be an air pocket in demand between MI355 and the launch of its rack-scale Helios platform with MI455, which isn't expected to ramp into volume until late 2026."
(MI355 is a high-performance GPU accelerator for artificial intelligence functions. MI455 is the next generation AMD AI chip.)
Citing "supply chain checks," Vinh now believes "the recent surge in hyperscaler demand has led to AMD to almost being completely sold out of server CPU in 2026 and is potentially considering a price increase of 10-15% in 1Q26. We estimate server CPU for AMD will grow at least 50% this year."
So demand for AMD chips is doing just fine, thank you very much.
Is AMD stock a buy?
AMD could sell 200,000 of its MI355 chips in H1 2026, and ramp MI455 production in H2, according to Vinh. He's forecasting $14 billion or even $15 billion in AI revenue for AMD this year. That's roughly triple the company's AI revenue in 2024.
With consensus estimates calling for $45 billion in total company revenue, AI could soon be about one-third of AMD's business, and growing like a proverbial weed. Most analysts agree AMD will probably grow earnings at about 44% annually over the next five years.
With a P/E ratio north of 100, it had better. Otherwise, AMD stock won't be a buy at all, but a sell.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.
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