Advanced Micro Devices (AMD) has gained about 128.45% year to date, at the time of writing, Thursday afternoon, June 11. Meanwhile, the SPDR S&P 500 index (SPY) is up about 8.47% in the same period.
The company has outpaced the S&P 500 by a huge margin. That is impressive, but what is driving these gains?
AMD is a semiconductor company that makes CPUs and GPUs, and its stock has rallied amid the AI boom.
Key news items for AMD stock:
- Bank of America revised its server CPU sales forecasts in April.
- AMD reported strong earnings on May 5, and Goldman Sachs raised its price target for the stock.
- AMD confirmed investments of more than $10 billion in the Taiwan manufacturing ecosystem.
- The company ramped up production of its next-generation EPYC Processor.
Bank of America recently held its Global Tech Conference, and following the conference, analysts had a lot of information to process, leading to changes in outlook.
In a research note shared with me, Bank of America analyst Vivek Arya and his team have changed their server CPU total addressable market (TAM) forecast again, and tweaked their price target for AMD stock accordingly.
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Bank of America raises CPU sales forecast
The team raised its 2030 server CPU TAM estimate to $170 billion or more from $125 billion. This represents nearly five times growth and a 37% compound annual growth rate (CAGR) over the period from 2025 to 2030.
Analysts divided the estimates into three CPU categories:
- Traditional/on-premise/multi-tenant cloud CPUs TAM of approximately $30 billion.
- AI cluster compute/head node CPUs TAM of approximately $70 billion.
- AI agentic standalone node CPUs TAM of approximately $70 billion.
Analysts said that while custom AI accelerators, based on application-specific integrated circuits, remain critical for AI inference workloads, they believe that, for agentic AI, many orchestration and decision-making functions are better suited to CPUs.
Arya wrote: “We expect head/compute nodes in AI clusters to use higher frequency and stronger but fewer cores, while agentic and traditional applications will rely on higher core counts.”
In their new model, the team believes server CPUs will hit 8% or more of overall data center systems TAM over time.
Bank of America raises AMD stock price target
The team estimates AMD’s market share at 25% to 27% through 2030, due to AMD’s performance lead at the high end, but offset by relatively stronger ramp-ups of ARM-based processors launching in 2027. Analysts noted that AMD’s leading core-count portfolio is an important advantage for the company. Adding that “higher core density within a fixed power envelope increases overall aggregate service throughput.”
More tech stocks:
- Morgan Stanley resets Nvidia stock forecast after key event
- Citi revisits Broadcom stock price target after post-earnings selloff
- Bank of America resets Marvell stock price target after earnings
The team said that AMD’s EPYC Venice, launching in the second half of 2026, is expected to top out at 256 cores, while the previous generation of EPYC topped out at 192 cores. Analysts noted that this is much higher than Nvidia’s upcoming Vera CPU at 88 cores, as well as Intel’s current Granite Rapids, which tops out at 128 cores, and upcoming Diamond Rapids, likely maxing out at 192 cores.
Arya reiterated a buy rating for AMD stock and raised the target price to $560 from $500, based on a 42x multiple of his 2027 non-GAAP EPS estimate.
He noted that AMD’s historical multiple range is 13 to 58, and he believes that his multiple is supported by AMD’s potential annual EPS CAGR of 50% or more, and its AI CPU/GPU share gain potential.
Analysts noted downside risks for AMD:
- Execution on the first rack-scale product (MI400 Series).
- Timing/magnitude of Middle East AI projects.
- The lumpy nature of consumer and enterprise spending could delay the acceptance and success of new products.
- Heavy reliance on a single outsourced manufacturing partner.
- Maturity of the current game console cycle.
Upside potential:
- Greater share-gain potential in the PC and server processor market compared to competitors.
What do other analysts think, and how does Bank of America’s opinion compare?According toMarketBeat, 31 of the 44 analysts covering AMD stock rate it a buy. 13 give a hold rating. The average price target is $419.86.
Related: Bank of America resets Broadcom stock price target after earnings