This chipmaker is catching up to Nvidia and can soar 45%, HSBC says

HSBC upgraded Advanced Micro Devices (AMD) to Buy from Hold, significantly raising its price target to $200, implying a 44.5% upside, citing the strong potential of AMD's new MI350 series AI chips. Analyst Frank Lee anticipates the MI350's significant pricing premium, with an estimated $25k average selling price, and performance comparable to Nvidia's B200, will drive higher-than-expected AI revenue for AMD as soon as H2 2024. This positions AMD for a significant re-rating, as the market has not fully priced in its strengthening competitive stance in the AI GPU market.

Analysis

An upgrade of Advanced Micro Devices (AMD) to Buy from Hold by HSBC, coupled with a price target doubling to $200, signals a significant shift in the perceived competitive landscape for AI accelerators. The core of this bullish thesis rests on AMD's recently launched MI350 series, which the analyst believes can directly compete with Nvidia's flagship B200 GPUs in performance. Crucially, HSBC has revised its average selling price (ASP) assumption for the MI355 to $25,000 from a previous $15,000, a material change expected to drive higher-than-anticipated AI revenue as soon as the second half of 2024. Despite a 14.6% year-to-date share price increase, the analysis suggests the market has not fully priced in this potential revenue upside, creating an opportunity for a stock re-rating. A key supporting factor is the MI350's reported compatibility with existing data center infrastructure, which could lower adoption barriers and accelerate its market penetration.

Key Decisions for Investors

• Investors should re-evaluate AMD's position in the AI accelerator market, as its MI350 chip series is now viewed by analysts as a credible high-performance competitor to Nvidia with significant pricing power not yet fully reflected in the stock price.
• Monitor AMD's upcoming earnings reports for management commentary on MI350 adoption, realized average selling prices, and any upward revisions to AI revenue guidance for H2 2024 and FY2025 to validate the analyst's thesis.
• While the outlook for AMD has improved, it is prudent to track Nvidia's competitive response, including pricing strategies and customer announcements for its Blackwell line, as this will be a critical determinant of AMD's ultimate market share gains.