AMD has been one of the most explosive AI stocks on the market. Up nearly 200% since the
year began, it could see further upside.

Helping, analysts at Oppenheimer just upgraded the stock to an outperform rating from
perform, with a $600 price target. In fact, the firm sees a growing opportunity for AMD to
become a long-term supplier of the chips powering artificial intelligence.

Why Oppenheimer Turned Bullish

Oppenheimer analyst Rick Schafer pointed to momentum in server processors and AI chips
following the company’s earnings report and discussions with management. The broader
opportunity involves becoming a supplier that customers keep choosing as their computing
needs expand. Schafer expects OpenAI and Meta to support growth through the first quarter,
with Anthropic beginning to ramp later in that period.

He also sees deployments involving other major customers continuing into 2028. Those are
analyst expectations, but they help explain the upgrade.

Data Centers Are Driving the Results

AMD’s latest earnings offer tangible support for that longer-term argument.

Third-quarter revenue reached about $13.38 billion, an increase of 45% from a year earlier.
Adjusted earnings were $2.09 per share, up 74%. Data center revenue climbed 97% to $8.5
billion, reflecting demand for EPYC processors and Instinct AI chips.

That means data centers supplied roughly 64% of total quarterly revenue. AMD’s fortunes are
increasingly tied to the computing systems behind cloud services and artificial intelligence.
For shareholders, that is an encouraging combination: rapid expansion alongside improving
operating profitability.

Google Adds Another Route to AI Growth

AMD’s opportunity extends beyond selling its own AI accelerators.

The company announced that fifth-generation EPYC processors power the host infrastructure
for Google Cloud’s TPU 8tx system. These processors help prepare data, coordinate workloads
and manage communication with Google’s AI accelerators. The collaboration also supports
protections for sensitive information while it is being processed.

Google’s TPUs perform specialized AI work, while AMD supplies processors that help the
broader system operate.

For investors, this suggests AMD can participate in AI spending through multiple types of
hardware. Its opportunity includes both Instinct accelerators and the server processors
supporting systems built around other companies’ chips.

Meanwhile, AMD’s planned annual AI chip releases give customers a roadmap for future
purchases. Oppenheimer highlighted the MI500 generation expected in 2027 as part of that
continuing development effort.

A Strong Outlook, With Margins Worth Watching

AMD expects fourth-quarter revenue of about $17 billion, plus or minus 3%. At the midpoint,
that would represent roughly 27% growth from the third quarter. Management also projects an
adjusted gross margin of approximately 55%. That revenue outlook points to considerable
momentum. However, the gross margin forecast is below the third quarter’s 56%, making
profitability an important number to watch alongside sales.

AMD has several ingredients investors want: expanding demand, established customers and a
growing role in AI infrastructure. In addition, the pullback in Advanced Micro Devices makes the
stock worth another look. But the lasting opportunity rests on AMD delivering its next
generation of products, converting customer plans into revenue and maintaining attractive
profitability. Continued progress on those fronts would give investors a much stronger reason
to own the shares than a bullish price target alone.

From its current price of about $585, we’d like to see it challenge $650 before the end of the
year. In 2027, we’d like to see it closer to $800.

Sincerely, 

Ian Cooper

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