Why AMD Stock Is Rising Today: A New Era in AI-Driven Growth

Victor HaleMonday, Jun 23, 2025 4:02 pm ET
2min read

Advanced Micro Devices (AMD) has emerged as a key beneficiary of the AI revolution, with its stock gaining momentum following a significant upgrade from Melius Research. The firm's Buy rating and $175 price target—up from $110—highlight a transformative shift in analyst sentiment, driven by AMD's dominance in AI inferencing and its expanding product portfolio. Let's dissect why this semiconductor giant is poised for sustained growth and what investors should consider.

The AI Inferencing Catalyst

Melius Research emphasized that AMD's GPUs are now central to the rapidly growing AI inferencing market, which it describes as “much bigger than expected.” The firm's MI300/MI350 GPUs have gained traction among hyperscalers like Amazon, Meta, and OpenAI, while its upcoming MI400 platform—designed for next-gen AI workloads—could solidify its leadership.

The $10 billion partnership with Saudi Arabia's HUMAIN initiative is a game-changer. This investment in Middle Eastern data centers positions AMD to capture a critical market while diversifying its revenue streams. Analysts at Melius note that inferencing demand, driven by real-time applications like chatbots and recommendation engines, could add billions to AMD's GPU sales by 2027.

Outpacing NVIDIA?

AMD's competitive edge lies in its memory bandwidth advantage, which allows faster data processing in AI tasks. While NVIDIA's H100 GPUs dominate training workloads, AMD's chips are increasingly preferred for inferencing due to superior cost efficiency and scalability. This bifurcation of the AI market—where NVIDIA leads in training and AMD excels in inferencing—creates a dual opportunity for AMD to carve out a $50+ billion addressable market.

Moreover, AMD's Venice server CPUs and Helios rack-scale platform are bolstering its share in the high-margin data center segment. Server CPU revenue growth, paired with rising average selling prices in PCs, is reducing risks from Intel's price cuts and stabilizing margins.

The Numbers Tell a Bullish Story

Melius' revised financial forecasts are striking:
- 2025 EPS: $3.88 (up from $2.90)
- 2026 EPS: $5.77 (up from $4.10)
- 2027 EPS: $7.08 (up from $5.20)

These figures assume AMD captures 5% of the accelerator market—a conservative target given its partnerships. If it exceeds this, upside could reach $8.50+ in EPS by 2027, pushing the stock toward Melius' $175 target. Meanwhile, AMD's $6 billion share repurchase plan underscores management's confidence in its valuation.

Navigating Volatility, Seizing the Opportunity

AMD's stock has been volatile, plummeting from $211 in 2024 to $78 earlier this year before rebounding to $133. The consensus price target of $138.19 lags behind Melius' bullish stance, suggesting upside potential if the market aligns with the analyst's AI narrative.

Investors should consider:
1. Entry Points: The current price offers a 29% discount to Melius' $175 target. A pullback below $125—potentially due to near-term macro concerns—could present a buying opportunity.
2. Risk Factors: NVIDIA's potential countermeasures, supply chain hiccups, or slower AI adoption remain risks.
3. Long-Term Play: AMD's AI positioning and diversified product roadmap make it a core holding for tech investors.

Conclusion: A Buy for the AI Decade

AMD's strategic advancements in AI GPUs, coupled with analyst upgrades and tangible financial upside, position it as a leader in the $100+ billion AI inferencing market. While volatility persists, the long-term thesis is compelling. For investors seeking exposure to the AI revolution, AMD's stock—trading at a 30% discount to its $175 price target—offers a compelling entry point to capitalize on its growth trajectory.

The semiconductor landscape is shifting, and AMD is no longer just a challenger—it's a leader in defining the future of compute.

This analysis is for informational purposes only and should not be considered investment advice. Always consult a financial advisor before making investment decisions.