The Stock of Amd Soars, Narrowing in on a Record Close as Optimism About Ai Grows

Advanced Micro Devices Inc. (AMD) is rapidly approaching its record closing high, experiencing a significant surge on Tuesday that reflects growing optimism about the company's prospects in the field of artificial intelligence (AI). In midday trading, AMD's stock has risen by over 7%, reaching $157.67, placing it less than 3% away from its all-time closing high of $161.91 achieved on November 29, 2021.

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The Tuesday rally in AMD's stock is part of a broader uptrend in chip stocks, with the PHLX Semiconductor Index (SOX) rising by 1%, despite a slightly negative day for the Nasdaq Composite Index. Other chip-related stocks are also experiencing gains, with Nvidia Corp. up 2.8%, and Micron Technology Inc. up 2.3%.

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KeyBanc Capital Markets analyst John Vinh recently expressed optimistic views on AMD's server business, significantly raising his expectations for the company's MI300X accelerator designed for AI applications. In a note to clients on Tuesday, Vinh noted a substantial increase in demand for AMD's MI300X, indicating that software performance issues from late last year have been largely addressed.

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Vinh anticipates that Microsoft Corp. will increase its usage of the MI300X graphics processing unit in the first quarter, with potential follow-through from other customers such as Meta Platforms Inc. and Oracle Corp. According to Vinh, there is currently demand for approximately 500,000 MI300X GPUs, translating to around $8 billion in data center GPU revenues in 2024. This projection is significantly higher than his previous expectations of $3 billion to $4 billion. He also mentioned that AMD has expanded its Chip-on-Wafer-on-Substrate packaging capacity and is well-positioned to meet additional demand if it arises.

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The analyst sees a 24% upside for AMD shares and has increased his price target to $195 from $170. This positive outlook is fueled by the company's improved performance in the AI sector and the potential for increased demand in the coming quarters.

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In the broader chip sector, shares of Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) are also making gains, rising by 0.5% in Tuesday's session. These gains follow the victory of ruling-party candidate Lai Ching-te in Taiwan's presidential election. Despite global financial markets closely monitoring the election due to heightened geopolitical concerns, JPMorgan analyst Grace Ng stated that the victory for the Democratic Progressive Party aligns with general expectations.