Since the beginning of 2024, it has been one of the biggest “darlings” of the US stock market$Advanced Micro Devices (AMD.US)$Fourth quarter results will be announced after the market on January 30, EST.
According to consistent market expectations, AMD is expected to achieve revenue of 6.139 billion US dollars in the fourth quarter, an increase of 9.64% over the previous year; earnings per share are 0.26 US dollars, an increase of nearly 25 times the previous year. It is worth noting that since this year, the company has accumulated a cumulative increase of more than 22%, and its stock price has repeatedly reached new highs.
The market expects to see a recovery in AMD's customer division business this quarter as the PC market shows signs of improvement.
Since the third quarter of last year, the company's client business, including PC processor sales, has rebounded, achieving revenue of US$1,453 billion, an increase of 42.2% over the previous year. It is also the only business that exceeded expectations in the third quarter.
AMD previously stated that the year-on-year increase in this business was mainly due to increased sales of Ryzen (Ryzen) mobile processors. The company pointed out that the increase in sales of Ryzen 7000 series CPUs drove the business's revenue growth of 46% month-on-month.
Also, considering that the widespread use of ChatGPT has contributed to a surge in demand for high-performance graphics processors (GPUs), the market will also pay close attention to the sales performance of AMD GPUs.
The market predicts that the data center experienced a continuous quarterly decline in the third quarter of 2023, and growth is expected to return in the fourth quarter. Currently, according to unanimous expectations, the data center business is expected to record US$2,301 billion in the fourth quarter, up 39% year on year and 44% month on month.
Although AMD's GPUs are generally used more for games, etc., and Nvidia's chips are currently the preferred hardware solution in the field of AI training and inference, AMD is now also trying to challenge Nvidia's dominance in the field of artificial intelligence chips.
In December of last year, AMD released a new MI300 series AI chip. The company said the chip has industry-leading generative artificial intelligence memory bandwidth and leading performance for large-scale language model training and inference. AMD expects the MI300 chip to bring in revenue of 400 million US dollars in the fourth quarter, while saying sales will exceed 2 billion US dollars in 2024.
What do the Wall Street giants think?
Taken together, Wall Street currently generally believes that demand from tech giants such as Microsoft, Google, and OpenAI may boost AMD's AI chip sales.
Wade Bush, a well-known American investment bank, recently sharply raised the target stock price of chip manufacturer AMD. The reason is that the company's chances of becoming an important player in the field of artificial intelligence (AI) chips are increasing, and its target price has been raised from 130 US dollars to 200 US dollars. The analyst predicts that
AMD's data center GPU sales revenue is expected to reach 3.1 billion US dollars this year, higher than the previous forecast of 2 billion US dollars. It is expected that by the end of this year, AMD may reach a “medium to high single digit” share of the overall AI GPU market.
UBS analysts said that due to AMD's recent rebound, the strategy around profit is somewhat complicated, but despite this, they are more confident about AMD's data center GPU revenue, which in turn raised their 2024 and 2025 expectations and raised their target price sharply from $135 to $220.
After analyzing the possibility of using 400 billion US dollars for artificial intelligence chips in 2027, the research agency New Street raised AMD's rating from neutral to purchase, and the target price was 215 US dollars. The analyst told investors in a research report that
Judging from the potential of artificial intelligence chips in data centers, AMD is considered the company with the most attractive valuation and the greatest potential for correction in this work.
Barclays analyst Tom O'Malley previously raised AMD's target share price from $120 to $200, and said AMD's AI chip sales could reach 4 billion US dollars this year and exceed 7 billion US dollars in 2025. The bank believes there is strong demand for AMD's highest-end AI chip, the MI300.
Under optimistic expectations of strong demand for AI chips, technology stock analyst Beth Kindig predicts that next year, AMD's MI300 chip shipments will reach 300,000 to 400,000 yuan, while Nvidia's H100 will reach 1.5 million to 2 million yuan.
However, some analysts believe that it is difficult for AMD to shake Nvidia's leading position.
Northland analyst Gus Richard predicts that by 2027, the AI chip market will reach 125 billion US dollars, of which AMD's sales are 16 billion US dollars, and the market share is about 13%. It believes that AMD's total revenue will reach 45 billion US dollars in 2027, and the revenue reflected in the current stock price is significantly higher than this figure.
How did the stock price perform on previous earnings days?
According to Market Chameleon, after backtesting the past 12 quarterly results days, AMD had a high probability of falling on the day of the results release, which was about 58%. The average change in stock price was ± 6.6%, the maximum decline was -13.9%, and the maximum increase was +12.6%.
Currently, AMD's implied change is ± 9.5%, indicating that the options market rose or fell 9.5% in a single day after betting on its performance; in comparison, AMD's average post-performance stock price change in the first 4 quarters was ± 9.6%. Judging from the bias in the volatility of options, the market is currently bullish on this stock.
Cow friends,
Are you optimistic about AMD's fourth quarter results?
Welcome to predict the rise and fall of AMD's earnings report.
Is it a sharp increase of 5% or more, normal performance (-5%-5%), or a sharp drop of more than 5%?
Click to make an appointment:US Ultra Micro 2023Q4 results live broadcast
Editor/Somer