AMD stock: Piper Sandler explains why chipmaker remains well-positioned for 2024

AMD (NASDAQ:AMD) stock has taken a bearish turn in recent weeks, posting double-digit declines since peaking in early March. Despite this underperformance, Piper Sandler analysts believe the chip making giant remains well-positioned to continue its overall uptrend in 2024.

AMD stock pulls back

In Thursday's trading, AMD stock took a heavy hit, marking its largest single-day percentage decrease in almost a year.

The stock plummeted 8.3% by the session's close, culminating in AMD's most substantial daily loss since it fell 9.2% on May 3, 2023, as per Dow Jones data.

Shares of other prominent semiconductor companies also experienced declines, though not as steep. Super Micro Computer (NASDAQ:SMCI) Inc. saw its shares fall by 5.7%, while shares of Nvidia Corp . (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) Inc. lost 3.4%.

This downturn in the semiconductor industry mirrored a broader market slump, partly due to uncertainty over the Federal Reserve's monetary policy path this year.

Despite yesterday’s sell-off, AMD stock remains 12.5% up since the start of 2024, extending its robust performance from last year amid relentless growth in the AI space.

The chip maker's revenue rose to $6.17 billion in the fiscal Q4 2024, exceeding market expectations.

The company also delivered a positive update on its AI chip sales outlook, saying it expects $3.5 billion in data center graphic processing unit (GPU) sales for 2024 under its Instict brand, up from the previous forecast of $2 billion.

Still, while AMD stock remains above its 200-day moving average, it has recently taken a bearish turn, declining roughly 27% since topping out in early March.

Piper Sandler remains bullish on AMD stock

Recent weeks haven’t been very rewarding for AMD investors, however, analysts at Piper Sandler believe the AI chip manufacturer’s outlook ahead remains bright.

The investment bank said in a note that it remains confident in the AMD management team's capacity to achieve targets for its sophisticated AI chip MI300, for both this year and 2025.

“We maintain that the price to performance ratio for the MI300 is really strong and is gaining traction specifically around inference applications,” analysts said.

“In particular, latency relating to memory performance is paramount for these applications, and we feel MI300 is configured to address these issues,” they added.

Piper Sandler forecasts $4 billion in MI300 revenues in 2024 and $7.6 billion for the 2025 fiscal year.

Moreover, the analysts think that CPU inventories are in a much better place following the downturn and the correction that followed in 2023, saying they “remain confident that the segment will grow year-over-year in 2024 despite moves to accelerated compute and we are modeling as such.”

“Our base case posits that AMD’s momentum and market share gains in server are set to continue through the year. Importantly, we view AMD as the incumbent on the cloud side for CPU servers,” wrote analysts.

As for its gaming sector, analysts believe the business has been largely “de-risked” following recent guidance from management.

They anticipate a modest recovery in the latter half of the year, though not sufficient to counteract a notable annual decline in 2024. For 2025, expectations are for a steady to slightly declining performance, attributed to the anticipated refresh in the console cycle, with the most challenging period expected in the upcoming two quarters.