Here's why these analysts see ‘a lot more to go' for AMD's stock in the next few years

Melius Research upgraded AMD to 'buy,' projecting substantial upside in AI chip sales driven by surging demand for AI inferencing and the company's new offerings, including the MI400 series and Helios rack-scale system. Analysts now forecast AMD's AI chip revenue to reach $6.6 billion in 2025, $9.7 billion in 2026, and $13.1 billion in 2027, propelled by increasing adoption from hyperscalers and sovereign customers, and strategic partnerships like the $10 billion deal with Saudi Arabia's Humain. This revised outlook anticipates AMD capturing significant market share in the expanding AI accelerator market, potentially exceeding $20 billion in GPU sales by 2028, despite an $800 million impact from China export restrictions.

Analysis

Melius Research has upgraded Advanced Micro Devices (AMD) to a 'buy' rating, citing a significantly improved outlook driven by accelerating demand for AI inferencing and a strengthened product roadmap. The upgrade is underpinned by raised AI chip sales forecasts, now projected at $6.6 billion for 2025, $9.7 billion for 2026, and $13.1 billion for 2027, even after accounting for an $800 million charge from U.S. export restrictions to China. Key to this optimism is AMD's new product pipeline, including the MI400 series and the Helios rack-scale system, which are expected to attract hyperscale customers like OpenAI, Microsoft, Meta, and potentially Amazon Web Services. Furthermore, strategic partnerships in the Middle East, such as a $10 billion deal with Saudi Arabia's Humain, are positioned to give AMD a higher-than-average market share in the region, partially offsetting lost China revenue. Analysts believe AMD has the potential to capture a 5% share of the projected $500 billion AI accelerator market by 2028, which could translate to over $20 billion in annual GPU sales, suggesting the current stock upswing may be part of a sustained move.

Key Decisions for Investors

• Given the upgraded sales forecasts and strong product pipeline, investors should evaluate AMD's position as a long-term beneficiary of the AI inferencing cycle, viewing the current stock volatility as a potential entry point.
• Monitor AMD's execution on its product roadmap and its success in gaining traction with key hyperscalers and sovereign clients, as these are critical milestones for validating the projected revenue growth to $13.1 billion by 2027.
• Consider the geopolitical landscape as both a risk and an opportunity; while the China ban creates an $800 million headwind, success in sovereign AI deals in the Middle East provides a significant hedge, and any future easing of China restrictions would represent substantial upside to current forecasts.
• Assess the competitive dynamics with Nvidia, paying close attention to whether AMD's new rack-scale architecture and memory capabilities can secure the 5% market share analysts deem 'possible' in the rapidly expanding AI accelerator market.