Advanced Micro Devices (AMD 4.26%) stock skipped 3.5% higher through 10:30 a.m. ET Tuesday, and you can thank Wells Fargo for that.
In a note this morning, Wells analyst Aaron Rakers raised his price target on AMD stock to $615 per share, implying he sees 10% upside over the next year.
Image source: Advanced Micro Devices.
Why Wells Fargo likes AMD stock
10% may not sound like much in today's overheated stock market -- especially for a semiconductor stock! But Rakers likes AMD's prospects regardless, writing today on StreetInsider that he sees AMD earning about 3% more than other analysts in calendar year 2027 ($13.40 per share), and 8% more in 2028 ($18.75 per share) -- and on course to a near-term peak earning around $20 per share.
Strong demand for computer CPUs underlies Rakers' bull thesis, driving up chip prices.
The biggest growth will arrive this year, with revenue expected to rise 68% again 2025 numbers, followed by 28% growth in 2027 and 22% more in 2028 -- leaving AMD with annual CPU revenue of about $25 billion. GPU numbers should look even better -- $15.6 billion this year, shooting up to $40.6 billion in 2027 and $63 billion in 2028.
NASDAQ: AMD
Key Data Points
What's next for AMD stock
Big picture, Rakers is seeing a shift from artificial intelligence training (building LLMs) to AI inference (AI answering questions), giving AMD a chance to reset the board and catch up to AI leader Nvidia (NVDA 1.39%) by selling more "high core-count server CPUs" in addition to GPUs.
Success isn't guaranteed, though, with Nvidia beginning its Vera CPU push. And at 180 times trailing earnings, AMD is hardly a cheap stock -- arguably six times more expensive than Nvidia at 30 times earnings!
Following Wells Fargo into this trade might not be the right move.
