HSBC Upgrades AMD to Hold, Target Price 33% Higher on AI, Trade Ease, Earnings

HSBC has upgraded its rating for AMD (AMD.US) from "sell" to "hold" and raised its target price from $75 to $100. This decision is driven by three key factors. Firstly, AMD's collaboration with Saudi Arabia on artificial intelligence (AI) presents new opportunities for the company. Secondly, the easing of international trade tensions has created a more favorable environment for AMD's operations. Lastly, the company's strong financial performance and strategic initiatives have further bolstered its market position. These factors collectively contribute to the optimistic outlook for AMD, as highlighted by HSBC's analyst Frank Lee.

Lee emphasized that AMD's collaboration with Saudi Arabia on AI is a significant development. This partnership not only opens up new markets but also positions AMD as a key player in the rapidly growing AI sector. The potential market size (TAM) for AI applications is vast, and AMD's involvement in this area is expected to drive substantial growth. Lee noted that AMD's new AI chips, set to be released soon, are anticipated to enhance the company's competitive edge and help it better compete with rivals like Intel.

In addition to the AI collaboration, the easing of international trade tensions has provided a more conducive environment for AMD's operations. The reduction in trade barriers and tariffs has facilitated smoother supply chain operations and reduced costs, allowing AMD to focus more on innovation and market expansion. This favorable trade environment is expected to support AMD's growth trajectory in the coming quarters.

AMD's financial performance in the first quarter of 2025 has been particularly impressive. The company reported revenue of $74 billion, a 36% year-over-year increase, driven primarily by strong performance in the data center and client segments. Net income also saw a significant boost, rising by 55% year-over-year. This strong financial performance is attributed to the increasing contribution of high-margin data center products and the optimization of the Ryzen processor portfolio. The data center business, in particular, saw a nearly 57% year-over-year increase in revenue, with EPYC server processors and Instinct AI accelerators being key contributors to this growth.

Lee's optimistic outlook for AMD is further supported by the company's strategic initiatives and product innovations. The upcoming release of new AI chips is expected to strengthen AMD's position in the market and drive further growth. Lee believes that these new products will not only enhance AMD's competitive edge but also help the company better address challenges posed by competitors like Intel. Overall, the combination of strategic partnerships, favorable trade conditions, and strong financial performance positions AMD for continued success in the technology sector.