AMD shares jumped last week on the A.I. buzz. Wall Street weighs in on the stock's future

Published Tue, May 30 20238:46 PM EDT

Wall Street is again abuzz over artificial intelligence ever since chipmaker Nvidia reported blowout earnings last week. Shares of Nvidia and other chipmakers surged on the back of the excitement. Nvidia CEO Jensen Huang said Nvidia was experiencing "surging demand" for its data center products. That prompted investors to pile into other stocks that could benefit from AI, leading many of those names to be among the biggest weekly winners. One of those was rival chipmaker Advanced Micro Devices , which soared 18% by Friday, adding to its soaring gains of 96% so far this year. On a one-year basis, however, it has gained just 19% following sharp losses in 2022. Analysts who've been very optimistic about the stock believe that like Nvidia, AMD has the potential to ride the AI wave . Both create graphics processing units underpinning most generative AI tools. But what lies ahead for the stock and does it have the potential to surge further? CNBC Pro combs through Wall Street research to find out. Not 'a major choice' for A.I. Eric Ross, chief investment strategist at Cascend Securities, told CNBC's " Squawk Box Asia " last week that AMD is set to do well but "not as much from AI as one would think." "Even though they do make graphics processors but they don't have that architecture ... that Nvidia has," he said, referring to Nvidia's Cuda platform, which allows software to use certain graphics processing units. "AMD is doing well, but really isn't a major choice for AI — a positive but not as much as NVDA," he said. Nevertheless, he said, AMD is set to see strong data center demand. One bright spot is that AMD is pulling market share away from Intel , Ross said. BofA echoed that sentiment in a May 22 report: "AMD's success is largely a result of its innovative design/architecture, strong TSMC foundry partnership, and very importantly rival Intel's multiple missteps." The bank said that AMD is "on the verge of another large opportunity" in the $80 billion AI accelerator market, referring to a system designed to speed up AI or machine learning applications. However, that area of AI is currently cornered by Nvidia, which has around 75% market share, according to BofA. It raised its price target for AMD from $105 to $120 — which the stock surpassed last week. But BofA still retained its neutral rating for AMD, as it believes that gaining market share against Nvidia could prove tougher than expected. Morgan Stanley was the most bullish on AMD, calling it its top pick. It said it was turning more optimistic on the stock, thanks to AMD's share of the opportunity in graphics processing units. "In terms of AMD's share of that opportunity, it seems more tangible and durable than our initial expectations, with solid revenue forecasts from two of the four US hyperscalers — with prospects for a third — at unit levels that materially surprised us," the bank said, referring to large cloud service companies. But analyst forecasts for AMD painted a less optimistic picture for the stock on the whole. According to FactSet, analysts covering the stock gave it average potential downside of -16.7%, although more than half gave it a buy rating. — CNBC's Michael Bloom contributed to this report.