Why AMD Stock Crushed it on Thursday
Key Points
In doing so, he also flagged the company as a top pick.
This was accompanied by a meaty price target increase.
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The wider tech sector might not have had a spectacular Thursday on the market, but we can't say that about veteran chipmaker Advanced Micro Devices (NASDAQ: AMD). The chip segment, generally, and AMD specifically, were given a lift by a bullish new analysis from an analyst at an influential bank. With that, AMD's stock surged by 8% on the day.
Tops of its class
Before market open, Vivek Arya of Bank of America Securities published a note on the current state of the global chip market. According to reports, he raised his estimate of the total addressable market for server central processing units (CPUs) in 2030. The new projection is $170 billion, well up from his previous $125 billion.
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Unsurprisingly, much of Arya's bullishness stems from the powerful emergence of agentic artificial intelligence (AI). In the analyst's view, this is a massive catalyst for makers of different types of CPUs. He's estimating a 37% compound annual growth rate from 2025 to 2030.
Arya also flagged AMD as his bank's top stock pick in the CPU space. He cited its long-term market position and the upcoming launch of its next-generation server processors (code-named Venice) as the two main factors in this choice. With this, he raised his price target on the stock to $560 from $500.
AI for the win
Any stock or sector has a ceiling, of course, but it's hard to see one just now for the modern chip industry. AI-fueled demand has significantly boosted the values of the better chippies, and it's showing little sign of cooling down anytime soon.
I think AMD is a fine play on this dynamic. Yes, it trades at high valuations, and it recently experienced a multi-session price dip largely because of that. However, the stock's quick, sharp bounce-back following Arya's move demonstrates its resiliency and value. I believe it has much more room to run as an investment.
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Bank of America is an advertising partner of Motley Fool Money. Eric Volkman 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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