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Bank of America sets Street's highest price target for AMD, says shares to keep surging

Key Points
  • Bank of America Merrill Lynch raises its price target to $35 from $25 for AMD shares, citing the chipmaker's process manufacturing advantage over Intel.
  • The firm's analyst Vivek Arya says AMD's valuation is "compelling" versus its two main competitors.
Sam Yeh | AFP | Getty Images

Bank of America Merrill Lynch is getting more bullish on AMD shares, even after the stock's stunning performance this year.

The firm raised its price target to $35 from $25 for Advanced Micro Devices, citing the chipmaker's process manufacturing advantage over Intel. The new price target is 25 percent higher than Tuesday's closing price and is the highest target of the 24 analysts who cover AMD on Wall Street, according to FactSet. Bank of America also reiterated its buy rating for the chipmaker.

"AMD's accretive share gains could extend given main rival's Intel's manufacturing challenges," analyst Vivek Arya said in a note to clients Tuesday. "We anticipate continued positive news flow around customer traction (engaged with all top 7 cloud providers, only announced 3 thus far); and around the pipeline."

AMD shares have soared 170 percent this year, and chart points to more room to run

AMD shares closed up 1.6 percent Wednesday.

The chipmaker is seen beating Intel to market with a more advanced chip. Intel has said its 10 nanometer chips will be released for holiday 2019, delayed from a plan to roll them out earlier. But AMD is expected to have its 7 nanometer next-generation server chips next year.

One nanometer equals one-billionth of a meter. Smaller nanometer chipmaking technologies historically have allowed companies to create faster, more power-efficient chips.

Arya said AMD's market value of roughly $25 billion is 8 percent the size of the cumulative market value total of its two main competitors, Intel and Nvidia.

AMD's valuation "is compelling relative to the growth opportunity," he said.

AMD shares rose 11.5 percent Tuesday after Cowen and Jefferies raised their price targets to $30 for the chipmaker's shares.

AMD's stock is significantly outperforming the market this year. Its shares are up 173 percent year to date through Tuesday versus the S&P 500's 8.3 percent gain. The company's stock is the top-performing name in the S&P 500 this year.

— CNBC's Michael Bloom contributed to this story.