AMD slumps as Wall Street praises AI efforts, sees light at end of PC tunnel
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AMD (NASDAQ:AMD) shares fell 5% in early trading on Wednesday after the semiconductor company reported second-quarter results and guidance that impressed Wall Street, with many analysts citing progress in artificial intelligence and the PC space.
Citi analyst Christopher Danely, who upgraded AMD (AMD) to buy from neutral and raised his price target to $136 from $120, said that the firm was wrong on the fact the company's AI products, in particular MI300, would be margin dilutive.
Last month, Danely opened a 90-day negative catalyst watch on AMD (AMD).
Speaking on the earnings call, AMD (AMD) Chair and CEO Dr. Lisa Su said AI customer engagements grew seven times sequentially, aided by the MI 250 and MI300 hardware and software. 
Customer interest in the MI 250 and MI 300 accelerators are "very high," with continued engagements with top tier cloud providers, with production on track to ramp for the MI 300 in the fourth-quarter, she added.
Dr. Su also explained that AMD's (AMD) AI strategy is focused on three areas - having a broad portfolio of multi-generation roadmap for GPUs and CPUs; extending the software platform to be deployed easily; and continue collaboration - all of which is on track.
J.P. Morgan analyst Harlan Sur raised his price target to $130 from $92, but kept his neutral rating, noting that the company is still driving "strong execution/innovation" in its compute portfolio as it looks to take 500 basis points of server CPU share this year, largely from Intel (INTC). And with the MI300 on the way, the company is poised to take a part of the $150B AI opportunity over the next few years. 
"AI deployments of its MI300 should begin in the [first-half] of next year and with more meaningful ramp in the [second-half]," Sur wrote in an investor note. "Given the GPU supply constraints of its nearest competitor [Nvidia] (NVDA), we believe this is opening the door for potential adoption/share gain though the team is taking a more conservative approach and focusing on longer-term strategic customers."
KeyBanc Capital Markets analyst John Vinh, who reiterated his overweight rating on AMD (AMD), said the quarter was mixed, as servers were weaker because of soft enterprise demand and the continued cannibalization of servers from increased AI spend.
While the company lowered its data center outlook from double digit growth to high-single digits, it is still expecting a meaningful ramp in the fourth-quarter, aided by its Genoa/Bergamo line and the ramp of MI300A, Vinh added. MI300X is also expected to launch in the fourth-quarter.
Wedbush analyst Matt Bryson called the results "just okay," citing the weakness in the data center, with guidance seen as "arguably disappointing." However, it appears investors are looking past this as gains start to accelerate later this year and into 2024 and 2025, Bryson, who raised his price target to $155 from $145 following the results, explained.
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