By AMD shares gained 6% on Thursday after Nvidia CEO Jensen Huang resigned.
Investors are likely assessing whether the turmoil would provide an opportunity for the rival chipmaker to capture market share from the market leader.
Broadcom shares also gained nearly 7% in the session, indicating that the selloff is affecting Nvidia rather than the AI trade.
Nvidia shares were down 3.94%, recovering from a 14% plunge earlier in the session.
AMD had already gained 23% through Wednesday’s close this week, while Broadcom had climbed 18%.
The stock surged as William Blair upgraded the company, on the back of an improving outlook, Nvidia’s leadership uncertainty, and supply challenges at Intel.
William Blair upgrades AMD on improving outlook
William Blair analyst Sebastien Naji upgraded AMD from Market Perform to Outperform on Thursday, pointing to changes in four factors that had shaped the firm’s initial rating in July.
The brokerage noted that Intel’s Xeon server processor roadmap continued to face delays and supply shortages.
It also said the shift towards Arm-based host processors had proved less disruptive to AMD than previously expected.
Another factor was AMD’s valuation.
William Blair observed that the company’s valuation multiple had declined significantly even as earnings estimates increased.
The firm expects AMD’s data-centre artificial intelligence revenue to exceed its server central processing unit (CPU) business in the fourth quarter.
This growth is expected to be supported by the ramp-up of its Helios AI systems through 2027.
William Blair sees the potential for AMD to deliver more than 80% revenue growth next year, more than twice its longer-term model.
Nvidia leadership uncertainty creates opportunity for rivals
Nvidia’s leadership change has prompted investors to reassess the competitive landscape in the AI chip market.
AMD and Broadcom could benefit if customers look to diversify their chip suppliers amid uncertainty surrounding Nvidia.
Alphabet and Broadcom also operate in the tensor processing unit (TPU) market, giving them exposure to demand for alternatives to Nvidia’s products.
Bank of America raised its AMD price target to $700 from $650 while maintaining a Buy rating.
The brokerage reiterated AMD as its top CPU pick, citing its broad product portfolio, position across key segments, Zen 6 execution on 2-nanometre technology and improving supply visibility.
Data-centre growth supports AMD’s outlook
AMD’s latest financial results provide another basis for the positive outlook.
Fiscal third-quarter revenue increased 45% year over year to $13.4 billion, while data-centre revenue surged 97% to $8.5 billion.
The growth was driven by demand for its EPYC processors and Instinct graphics processing units (GPUs).
Management expects fourth-quarter revenue of approximately $17 billion, representing year-over-year growth of 66% at the midpoint.
However, competition remains a risk.
William Blair flagged custom application-specific integrated circuits (ASICs), particularly those being developed for Meta Platforms and OpenAI, as a potential challenge for AMD’s Instinct business.
The brokerage nevertheless sees custom chip programmes as creating additional opportunities for AMD’s server CPU business.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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