Melius upgrades AMD shares to Buy, says the stock ’has a lot more to go’

Investing.com -- Melius Research upgraded shares of Advanced Micro Devices (NASDAQ:AMD) to Buy from Hold, a move driven by growing confidence in the chipmaker’s positioning in the AI inferencing market.

The broker’s analysts also raised their price target to $175 from $110, arguing that AMD stock “has a lot more to go.”

“We are upgrading shares of AMD given our view that many things have changed for the better since the beginning of the year,” the analysts led by Ben Reitzes wrote.

They believe investors are only “in the middle of another move to the upside,” supported by the company’s expanding role in next-generation AI workloads.

Melius highlighted a number of positive developments not fully reflected in the stock, including stronger-than-expected demand for AMD’s MI300- and MI350-series GPUs and early traction for the upcoming MI400 platform.

The note emphasized that “inferencing is much bigger than expected” and that AMD’s GPUs have gained interest among hyperscalers and sovereigns due to their capabilities in memory bandwidth and software improvements.

In addition to AI, the firm flags that risks in the PC segment are diminishing, thanks to higher average selling prices (ASPs) and market share gains from Intel (NASDAQ:INTC). These factors, analysts said, should help “buffer a coming PC CPU in a chipset from Nvidia (NASDAQ:NVDA).”

Melius also pointed to strong customer momentum, with Amazon (NASDAQ:AMZN) set to offer AMD cloud instances and ongoing collaboration with OpenAI, Meta (NASDAQ:META), and Saudi Arabia’s HUMAIN.

AMD and HUMAIN are jointly investing up to $10 billion in data center infrastructure, which could lead to significant revenue opportunities in the Middle East.

“These partnerships point toward AMD’s share in the Middle East potentially being higher than its global share,” the analysts noted.

“We estimate that each gigawatt is worth multiple billions in opportunity for AMD, even if Nvidia gets the vast majority of the share,” they added.

Beyond GPUs, Melius expects continued share gains in high-margin server CPUs. The brokerage stresses that AMD’s new “Venice” chip and “Helios” rack-scale platform will be key drivers of future growth.

Earnings per share (EPS) estimates were revised sharply higher through 2027, with Melius now forecasting EPS of $3.88 for 2025, $5.77 for 2026, and $7.08 for 2027.

The analysts see scope for even more upside if AMD captures over 5% of the accelerator market, which they believe is increasingly likely given its product roadmap and traction with top-tier customers.

“If things break right, we could see a few billion of upside to GPU sales by 2027, driving over $1.00 in upside to our EPS estimate of $7.08,” they said.