AMD Relieves Market Despite Ongoing Share Price Outlook Caution

Key Points

• Advanced Micro Devices' blowout quarter and guidance weren't enough to please analysts worried about future gains.
• Headwinds exist in 2025, but demand for its products is strong, and strength was seen in the core business and the Data Center.
• The balance sheet is strong and more than capable of sustaining strength in the face of China-related charges.

Advanced Micro Devices NASDAQ: AMD Q1 results and 2025 guidance update sent a wave of relief through the market.

The results were better than expected, and guidance was solid despite the impact of tariffs and restrictions on China, yet analysts remain cautious.

The revision trend following the release included numerous share price reductions despite citing the very strong result, strength in core businesses, and outlook for market share gains. 

The takeaway is that Advanced Micro Devices faces headwinds in 2025. Still, its business is solid, arguably better-positioned than NVIDIA for the long term, and cheap relative to the long-term forecasts and price targets for 2025. 

Advanced Micro Devices Positioned for Long-Term Growth

Advanced Micro Devices is better positioned than NVIDIA NASDAQ: NVDA in the long term because of its diversification. NVIDIA is the leader in GPU, AI, and, to an extent, the cloud, but AMD is better-positioned as the #2 GPU provider and an increasingly important CPU provider with exposure to cloud, edge, and endpoint semiconductor markets.

NVIDIA can catch up, but it will take time. Meanwhile, AMD has already taken strides to improve its competitiveness in the GPU and AI markets, including advancing its software infrastructure and acquiring ZT Systems. 

ZT Systems designs, manufactures, and deploys rack-scale server solutions for hyperscalers and telecoms. Its acquisition is part of AMD's go-to-market strategy, enabling clients to harness and deploy AMD GPUs at scale. Likewise, collaboration with Rapt.ai aims to do the same. Rapt.ai provides an AI-enabled software platform that optimizes and maximizes GPU operations at scale.

It is optimizing its software for AMD's MI300 and future lines to reduce compute bottlenecks, maximize compute space, automate repetitive tasks, and improve developer efficiency for AMD clients. 

Advanced Micro Devices to Rise by 20% in 2025

The analysts are lowering their price targets following the guidance update, but there are a few things for investors to consider. First, the price target reductions are offset by several reiterated targets and an upgrade to Buy from Bank of America. Another is that the consensus rating is a Moderate Buy and is firming after the release. Additionally, the consensus of fresh targets is near $120, offering a 20% upside for the market, and dampened sentiment in Q2 sets the market up for happy surprises later in the year. 

Until then, the Q1 results and guidance are solid. There is an impact related to China, but even so, the quarterly results and guidance outpaced the analysts' consensus reported by MarketBeat, and guidance is likely cautious. It is usually from this company. As it is, the Q1 revenue of $7.74 billion is up 36% year-over-year, setting a record, and 430 basis points above the consensus. 

Revenue strength is driven by gains in the Data Center and Client segments, with DC up 57% and Client up 28%. There is some weakness within the Client segment, with Embedded down by 2.7% and Gaming down by 30%, but Embedded markets have been relatively stable over the last year, and both are expected to return to growth by the year’s end. 

Details from the Data Center segment are also encouraging. Not only is growth accelerating, but strength is seen in both the GPU and CPU subsegments. Looking forward, the guidance is also better-than-expected, with revenue expected to grow at a robust 26% pace, including China's impact, and maintain a solid double-digit pace through year’s end. 

Advanced Micro Devices Stock Rebound Underway, Hurdles Remain

Advanced Micro Devices' stock price hit its bottom in early April, and the rebound is underway. The market shows support at the 30-day EMA following the release and could move higher despite the downdraft in analysts' price targets. The critical resistance point in early May is near the $103.50 level and will likely be tested by the market. A move to the consensus of $120 is likely if this market gets above that level. A move to $120 would be a significant signal as it puts the market above the 150-day EMA, a trigger for long-term investors.