A broad rally in beaten-down software stocks, combined with a positive analyst note, helped Advanced Micro Devices (AMD +8.04%) stock to rise by over 8% on Wednesday. Another factor positively affecting sentiment was the company's position as an incumbent chipmaker, on a day when the most high-profile company in that space reported earnings.
Buoyed by the rally
AMD was already benefiting from the generally positive momentum in software titles because, all things being equal, the better that segment of the tech market performs, the better the business of semiconductor companies. Previously, legacy software businesses had been hammered over fears of disruption from artificial intelligence (AI) models that could do their work faster and cheaper.
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Also, before market open Bank of America published an update on the server CPU market, and the stocks associated with it. The high-profile bank raised its estimate of that market's size; it now expects it to rise from around $43 billion this year to $125 billion by 2030. Previously, it had estimated the latter figure would be $110 billion.
Not surprisingly, the bank's analysts concluded this based on processor demand for AI workloads. They wrote that CPUs will be central to the next phase of AI implementation -- agentic functionality, in which models actively perform complex tasks, rather than training, in which they learn such workflows.
NASDAQ: AMD
Key Data Points
The king's latest results
On top of that, next-generation processor king Nvidia reported its first quarter of fiscal 2027 results. Although this release occurred after market close, bullish sentiment about the company's performance during the period helped tech hardware stocks.
AMD is a veteran chipmaker that has traveled through many peaks and valleys in its business. That said, chip incumbents are facing determined competition from makers of custom ARM processors. While a rising tide often lifts most boats, I'd be cautious about AMD stock going forward.
