AMD: Loop Capital's Buy Rating Reinforces Investor Confidence

Key Points

• AMD stock is up about 4% after Loop Capital initiated coverage with a Buy rating and a $175 price target, nearly 50% above the stock price on January 17.
• The launch of the company’s MI300X GPUs is likely to be a key opportunity for the company to capture market share in this critical area.
• The technical setup suggests investors may want to enter a position before AMD reports earnings in early February.  

Analyst ratings can have a significant impact on stock price performance. That might be the reason that shares of Advanced Micro Devices Inc. NASDAQ: AMD are up 4.2% in the week ending January 17, 2025. In this case, it was Loop Capital that initiated coverage on AMD stock with a Buy rating and a $175 price target.

Loop Capital is only one analyst firm that is bullish on AMD stock. The Advanced Micro Devices analyst forecasts on MarketBeat give the stock a $178.61 price target which is 49% higher than its price on January 17.

That's why it’s helpful to understand why analysts give a stock a particular rating. In this case, Loop believes that AMD stock, which is still down 24.4% in the last 12 months even after the recent rally, doesn’t accurately reflect “some degree of success in accelerated computing...and idiosyncratic market share expansion opportunities in general-purpose compute within PC and general server markets.”

That has to be music to the ears of AMD shareholders who got walloped last year despite the company posting higher year-over-year revenue and earnings. However, it seems that analysts like Loop Capital may be coming around to the opportunity that exists in AMD stock.

MI300X: The Reason AMD Is Playing the Long Game

Among technology stocks, the chip market is frequently a "what have you done for me lately" sector, and AMD’s slow and steady performance hasn’t been enough to excite investors. In fact, despite announcing a substantial list of products the company will release in 2025, AMD stock dropped as investors continued to be narrowly focused on the GPU market when it comes to chip stocks.

However, that’s where the bullish case for AMD emerges. The company is launching its MI300X graphic processing units (GPUs) in Q1 2025. The company didn’t provide many details about the GPUs at the Consumer Electronics Show (CES) in January. That’s a little odd because this is where the company stands to be most likely to capture market share from NVIDIA Corp. NASDAQ: NVDA.

To begin with, AMD will have GPUs to deliver at a time when enterprises are looking for alternatives to NVIDIA. And with NVIDIA’s Blackwell units sold out, there’s an opportunity for another company to get its foot in the door.

Driving Revenue and Earnings Growth

Before considering an investment in AMD stock, you’ll want to consider why the MI300X series is so important to the company. The MI300X features unmatched memory and bandwidth and is designed to handle AI inference workloads.

To answer the next question many investors will have, AI inference is what happens when an AI model starts recognizing patterns in data that it hasn’t seen before. This allows the model to reason and make predictive analysis similar to human abilities.

Now, consider that the growing demand for AI training and inference is expected to be the biggest reason for believing that AI workloads will grow at a compound annual growth rate (CAGR) through 2027. 

And what’s the opportunity for Advanced Micro Devices? The AI market is expected to grow from $780 billion to $990 billion by 2027. So Advanced Micro Devices only needs to capture a small market share to possibly double its current annual data center revenue, which could add close to 50% to the company’s annual topline.

Getting Involved With AMD Stock

With that as a backdrop, you can start to understand why Advanced Micro Devices may be undervalued relative to the opportunity in front of it. That means this may be the ideal time to begin averaging into a position to ensure you can catch a strong move to the upside after the report.

The technical outlook is favorable for traders. AMD stock is trading at a discount to its 50-day moving average and is close to its 52-week low. Plus, the Relative Strength Indicator (RSI) is around 40, which puts the stock near the oversold range.

The company reports earnings on February 4, and options traders are relatively bullish. The Options Chain on AMD stock for February 7 shows the highest volume of Call options being made with AMC stock at a price of $130. That price would push it close to an inflection point with its 50-day SMA.