Citi Analyst Warns AMD Rally May Be "Empty Calories"

Citi analyst Christopher Danely calls the rally in AMD shares "empty calories" due to the potential for the chip ban in China to be reinstated. However, the firm views the Trump administration's $70B investment in Pennsylvania for energy and data centers as positive for AMD, Broadcom, Micron, and Nvidia.

Advanced Micro Devices (AMD) stock experienced a significant boost this week, rising nearly 8% after the company unveiled its new MI350 AI chips. The launch of these powerful chips, which are designed to challenge Nvidia's dominance in the AI hardware market, has investors optimistic about AMD's future prospects. However, not all analysts are convinced that this rally is sustainable.

The catalyst for the stock's surge was an upgrade by HSBC, which changed its recommendation from "Hold" to "Buy" and raised its price target from $100 to $200. This upgrade came as analysts and investors digested details about AMD's new MI350 chips, particularly the MI355X, which offers 22 terabytes per second (TB/s) of memory bandwidth, nearly three times that of Nvidia's Blackwell B200. Moreover, AMD's MI350 chips are expected to be 30% cheaper than Nvidia's comparable offerings [1].

AMD's stock performance is not just about price movement; it signals a broader shift in the AI chip race. Historically seen as a second-tier competitor, AMD is now positioning itself as a serious rival to Nvidia. The company has already lined up key customers such as Oracle, Microsoft, Meta, and OpenAI, which are crucial for its push into AI [1].

Despite the optimism, some analysts remain cautious. Citi analyst Christopher Danely described the rally in AMD shares as "empty calories," arguing that the chip ban in China could potentially be reinstated, making the recent gains unsustainable. However, Citi also views the Trump administration's $70 billion investment in Pennsylvania for energy and data centers as positive for AMD, along with other semiconductor companies such as Broadcom, Micron, and Nvidia [2].

The Trump administration's decision to ease restrictions on advanced silicon chips for China has also been seen as a potential boost for AMD. The easing of the ban allows AMD to resume shipments of its China-specific MI308 GPUs, which could lead to additional revenue for the company [3].

Looking ahead, AMD's stock performance will be closely watched, especially in light of the company's upcoming earnings report on August 5. Investors will be looking for updates on the adoption of MI350 chips and enterprise AI deals. Additionally, AMD's roadmap includes the MI400 series, which is expected to launch in 2026 and could challenge Nvidia's future Vera Rubin platform [1].

While the stock's recent performance is promising, investors should remain vigilant. The real test will be AMD's ability to execute on its plans, gain software traction, and compete with Nvidia's CUDA ecosystem. As the AI chip race heats up, the focus will be on real-world adoption and how Nvidia responds to AMD's challenge.

References:
[1] https://m.economictimes.com/news/international/us/amd-stock-soars-8-as-new-ai-chips-take-aim-at-nvidias-throne-is-a-power-shift-coming/articleshow/122515220.cms
[2] https://www.tipranks.com/news/the-fly/citi-calls-rally-in-amd-shares-empty-calories-thefly
[3] https://wccftech.com/bernstein-analyst-declares-nvidia-h20-ban-was-unnecessary-and-frankly-somewhat-nonsensical-another-analyst-sees-broader-strokes-of-a-rare-earths-deal/