When Advanced Micro Devices reports earnings after the bell Tuesday, the question is whether investors will focus on any near-term weakness or the larger artificial-intelligence picture. The chipmaker is betting big on AI , with CEO Lisa Su in June calling it AMD’s “largest and most strategic long-term growth opportunity.” She expects the data center AI accelerator market to grow from around $30 billion this year to over $150 billion in 2027. AMD also announced in June that the MI300X, its most-advanced GPU for artificial intelligence, will start shipping to some customers later this year. However, PC demand remains weak. Global PC shipments slipped 13.4% in the second quarter compared to the year prior, according to IDC data . AMD YTD mountain AMD year to date Analysts are expecting AMD’s fiscal second-quarter revenue to come in at $5.32 billion, per StreetAccount. They are anticipating earnings per share of 57 cents. “AMD is shaping up as a bit of a battleground,” Bernstein analyst Stacy Rasgon said in a note last week. While recent results have been disappointing , AMD has embraced the AI story as investors look for the next Nvidia , he said. “We have heard some lofty expectations for the business in 2024 and beyond,” Rasgon wrote. “However, the company is not even sampling their AI GPUs until Q3, strongly suggesting to us real volume might not be until the 2H of next year which might make it prudent to temper some of those expectations.” Rasgon has a market-perform rating on the stock and hiked his price target last week to $95 from $80 — which suggests 17% downside from Monday’s close. “The question will be whether investors are willing to look through any further near-term wiggles to the 2024+ AI dream,” he added. “We suspect for now they may be, but still would tread a bit lightly.” Deutsche Bank is also cautious. It has a hold rating and $110 price target, implying nearly 4% downside from Monday’s close. The firm expects in-line results for the second quarter, but is concerned about incremental downside to Wall Street’s third-quarter estimates given the high bar the company set for its data center in the second half of 2023. Meanwhile, Morgan Stanley remains bullish on AMD, despite some near-term risks. The firm has an overweight rating on the stock. Its $138 price target suggests nearly 21% upside ahead. “We see the MI300 launch almost perfectly timed to meet cloud customer desires to take advantage of low cost inference solutions for large language models,” analyst Joseph Moore wrote in a note Monday. However, he’s budgeted for the data center business to see some incremental weakness, modeling for 2.5% growth this year compared to the company’s double-digit guidance. TD Cowen is also bullish, maintaining its outperform rating and raising its price target to $135 from $115. “Overall, we believe investors are prepared for a mixed Q2/Q3 on revenue and margins as the macro remains challenging, and we adjust our 2H estimates to be more 4Q-weighted,” he said. “That said, we believe investor focus post earnings will again turn longer-term to AMD’s strong Datacenter prospects, including a crystallizing AI strategy supported by stronger HW/SW roadmaps.” — CNBC’s Michael Bloom contributed reporting.
