Agentic Ai Could Push This Trillion-dollar Chipmaker To N…

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Agentic AI could be huge for this chipmaker

The compute needs for agentic AI are a bit different than what it takes for standard LLM inference or training. For agentic AI to function well, it needs chips that can orchestrate models and provide step-by-step instructions for what to do next. That’s a process best handled by a CPU (central processing unit), not by a GPU (graphics processing unit) or another specialized chip.

AMD is the leading data center CPU maker, overtaking Intel in 2024. That lead could continue to expand, as AMD is capable of combining CPUs with GPUs into a complete solution. Meta signed a deal with AMD earlier this year that spans both its GPUs and CPUs, as well as its rack-scale systems that combine both into a single unit, along with storage and networking equipment.

Advanced Micro Devices Stock Quote

NASDAQ: AMD

Advanced Micro Devices

Premium Feature

Moneyball Superscore

95/100

Today’s Change

(-5.73%) $-34.71

Current Price

$570.82

Key Data Points

Market Cap

$932BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.

Day’s Range

$567.00 – $591.88

52wk Range

$188.22 – $658.52

Volume

335.2K

Avg Vol

22.9M

Gross Margin

50.37%

AMD recently released a CPU-only rack, Helion, designed specifically for agentic AI infrastructure. The move could help its partners quickly scale up its CPU servers to match their needs for agentic AI.

AMD’s push to sell more rackscale systems is seen as a catalyst for its growth. BNP Paribas analyst Karl Ackerman cited its full-stack across AI data center needs in his note on AMD earlier this month, while raising his price target to $960, upside of almost 60% for the stock from a recent price of $606. Citigroup analyst Atif Malik points to its close relationship with Meta and the success of Muse as signs of more growth to come. He raised his price target to $800. Mizuho analysts also see agentic AI driving data center CPU demand to the benefit of AMD. They put a price target of $705 on the stock.

Is the stock a buy?

Sell-side analysts can be an optimistic bunch, and it’s best for investors to do their own homework and analyze the future opportunities and expectations for a company before buying a stock.

The growth opportunity for AMD is vast, especially as the combination of proficient CPUs and GPUs in a rackscale system becomes more appealing in the agentic AI era. Of course, it’s not the only company competing in the sector. Nvidia (NVDA -3.16%) also makes rackscale solutions, and while its CPUs might not be on the same level as AMD’s, its GPUs are best in class — and the workhorse of AI data centers. Still, AMD should be able to maintain a healthy market thanks to its CPUs and buyers’ need to maintain a secondary source of GPUs to hedge against Nvidia in price negotiations.

That’s pushed the stock price 180% higher so far this year, taking its total market cap above $1 trillion. Its price-to-earnings (P/E) ratio now stands at about 77 times forward earnings expectations. Despite the strong earnings growth forecasts, the stock trades at about 25 times estimated fiscal 2028 earnings. If you think analysts are still lowballing the opportunity ahead for AMD thanks to agentic AI, the stock could be a great value at the current price despite the premium price tag. On the other hand, expectations for the company are already high, and that’s reflected in its stock price. Other chipmakers trade at much more attractive valuations, even with their own strong growth outlooks.