Why Nvidia rival AMD may see a 40% rip in its stock

Key Points:

• Raymond James analyst Simon Leopold upgraded AMD to Strong Buy from Outperform, raising the price target to $641, implying a 40% upside, above the average analyst target of $613.
• Leopold highlights AMD's strong position in AI chips and the server CPU market, which is expected to grow at a 44% CAGR to $201 billion by 2030, emphasizing AMD's earnings leverage and market-share gains.
• AMD reported record Q2 results with earnings per share of $1.66 and revenue of $11.5 billion, driven by its Data Center segment, where revenue more than doubled to $6.7 billion.
• The company projects significant growth in server CPU and data center revenues through 2027, with AI GPU revenue expected to grow over 100%, supported by new AI chips and integrated Helios AI systems.
• AMD announced major partnerships with Microsoft, deploying Helios in Azure AI services, and Anthropic, which plans to use AMD's GPUs extensively and received a $5 billion investment from AMD, marking a strategic push against Nvidia in AI infrastructure.