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Beyond the Jitters: Expect a Steady Climb from AMD in the AI Chip Race

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Advanced Micro Devices (NASDAQ:AMD), commonly known as just AMD, is sometimes a darling of the market. Other times, jittery investors will hastily sell their AMD shares. A fickle market doesn’t materially alter our AMD stock forecast, however, as the company is still a juggernaut among artificial intelligence chip makers.

Argus Director of Research Jim Kelleher recently opined that AMD has a “leg up” on many of the company’s competitors when it comes to AI. We tend to concur with this assessment, but some worry warts are deeply concerned about AMD’s future as an AI chip maker. Choose to appreciate, not condemn, AMD’s realistic outlook.

AMD Stock Falls Despite Decent Quarterly Results

Sometimes, the investing community can be hard to please. This was the case when AMD released its fourth-quarter 2023 financial results recently.

Here’s the quick rundown. AMD’s non-GAAP revenue grew 10% year over year to $6.17 billion, thereby edging out Wall Street’s call for $6.13 billion. Meanwhile, AMD’s non-GAAP adjusted EPS increased 12% YOY to 77 cents, a result that was exactly in line with the analysts’ consensus estimate.

AMD stock fell after the release of these data points. Perhaps it’s not enough for Big Tech companies to report in-line and slight-beat results anymore. It’s either a blowout quarter or a complete disaster.

Of course, sensible investors know better than that. Not every quarter has to be a blowout success. Yet, it wasn’t AMD’s Q4 2023 results that bothered investors the most.

The main point of contention was AMD’s current-quarter guidance, which called for revenue of “approximately $5.4 billion, plus or minus $300 million.” This outlook fell short of Wall Street’s forecast, which called for current-quarter revenue of $5.73 billion.

Not Everyone Is Panicking About AMD’s Guidance

AMD also raised its full-year 2024 MI300 AI processor revenue projection from $2 billion previously to $3.5 billion currently. That’s a huge guidance increase, but again, it wasn’t enough to impress some investors.

Not everyone is panicking about this, though. For example, CFRA Research analyst Angelo Zino raised his price target on AMD stock from $150 to $200. Per Barron’s, Zino argued that AMD “is likely still being conservative on its AI chip forecasts.”

Investors really shouldn’t punish AMD for providing a realistic forecast. However, sometimes the market can be spoiled and irrational. In any case, Benchmark Research analyst Cody Acree also raised his price target on AMD shares from $145 to $187. Acree called for investors to “take advantage of any pullback in the price.”

Moreover, Bernstein analyst Stacy Rasgon provided a level-headed take on AMD’s conservative current-quarter guidance. After “expectations for AMD” reached a “fever pitch in recent weeks and months… resetting those expectations is not necessarily a bad thing,” Rasgon suggested.

AMD Stock Forecast: Calm Your Jitters and Prepare for Higher Prices

AMD still expects to sell a whole lot of AI chips, but the company’s guidance is realistic and attainable. That’s a setup for a potential earnings beat, but the market didn’t initially see it that way.

Your AMD stock forecast shouldn’t be based on the market’s initial response as much as the facts, and the facts point to good quarterly results and reasonable guidance for AMD. Therefore, there’s no need to lose your cool. Feel free to conduct your due diligence on AMD and consider owning a few shares for a buy-and-hold position.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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