What Happened?
Shares of computer processor maker AMD (NASDAQ: AMD) jumped 6.5% in the afternoon session after Melius Research analysts upgraded the stock, citing improving prospects for the company's artificial intelligence chips.
Melius upgraded the stock from "hold" to "buy" and significantly raised its price target from $110 to $175 per share. The analyst noted that "many things have changed for the better since the beginning of the year," highlighting AMD's potential to gain ground on rival Nvidia, particularly in the AI inference market.
The firm believes investors will become more excited about AMD's GPU sales outlook from 2026 to 2028 and sees its upcoming MI400 processor, set to launch next year, as a potential big winner. The upgrade added to positive momentum for semiconductor stocks, boosting the overall sector.
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What The Market Is Telling Us
AMD’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 8 days ago when the stock gained 9.4% on the news that Piper Sandler analysts maintained a Buy rating and raised the price target from $125 to $140.
Following talks with management, the analysts became more bullish on AMD's AI business and expect the segment to grow even faster when the tariff headwinds in China have passed. They also highlighted the growing conviction on Wall Street regarding one of AMD's hyperscaler clients.
Separately, stocks rebounded as reports pointed to easing tensions between Israel and Iran. The Wall Street Journal said senior Iranian officials had signaled a willingness to restart stalled nuclear talks, on the condition that Washington refrain from joining Israel's ongoing strikes. This development triggered a significant decline in oil prices, easing inflation concerns. Also, it is possible some investors were buying the dip following the sell-off at the end of the previous week.
AMD is up 14.3% since the beginning of the year, but at $137.91 per share, it is still trading 25% below its 52-week high of $183.96 from July 2024. Investors who bought $1,000 worth of AMD’s shares 5 years ago would now be looking at an investment worth $2,633.
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