Advanced Micro Devices (AMD) shares rallied nearly 6% on Friday after Citi upgraded the stock, arguing that the market is underestimating the company's potential in the artificial intelligence GPU market. Analyst Atif Malik raised AMD to Buy from Neutral and increased the price target to $575 from $460, signaling strong conviction in the chipmaker's growth trajectory.
AMD's stock has more than doubled year-to-date, driven by surging demand for AI-related semiconductors. While much of the recent attention has focused on AMD's central processing unit (CPU) business, Citi believes the company's GPU strategy could become a major catalyst in the coming years.
Citi Sees Growing GPU Opportunity
According to Malik, investors still primarily view AMD as a CPU company, but the firm is increasingly positioning itself as a legitimate second source in the GPU market. The analyst estimates that current market expectations only reflect about a 60% probability that AMD will generate more than $50 billion in GPU revenue by 2028.
A key driver of Citi's bullish thesis is AMD's partnership with Meta Platforms. Earlier this year, Meta announced plans to deploy up to six gigawatts of AMD's Instinct GPUs under a multiyear agreement expected to begin later this year. Citi estimates AMD could generate approximately $15 billion in revenue for each gigawatt deployed, implying a potential $90 billion opportunity from Meta alone.
"We believe Meta will be a significantly larger customer of AMD's AI products, especially GPUs, than [Wall Street] is expecting," Malik wrote. The analyst also noted that AMD and Meta are developing a custom MI1450 GPU designed to lower total cost of ownership for Meta's AI infrastructure.
AI Demand Drives Higher Forecasts
Citi significantly raised its long-term AI revenue projections for AMD. Malik now forecasts AMD's AI revenue will reach $33 billion in 2027, representing 137% growth, and climb further to $50.8 billion in 2028, implying 54% year-over-year growth. These projections reflect the broader industry's accelerating investment in AI infrastructure.
Although Nvidia remains the dominant supplier of AI GPUs for training models, AMD is increasingly viewed as a leading alternative. The market is also becoming more competitive as companies like Google develop custom AI chips in partnership with Broadcom. Despite this, Citi believes AMD is well-positioned to benefit from strong spending by hyperscale customers seeking alternatives to Nvidia's products.
CPU Business Remains a Key Strength
Beyond GPUs, Citi remains optimistic about AMD's core CPU business. Malik expects AMD to remain "the key beneficiary of the CPU renaissance" as demand for server processors grows alongside AI inference workloads. He raised his estimate for the total addressable CPU market to $137 billion by 2030, up from $132 billion.
The rise of agentic AI and increased demand for inference computing have strengthened the outlook for server CPUs, a market primarily dominated by AMD and Intel. Malik expects AMD's upcoming Venice processors to outperform Intel's Diamond Rapids chips, though he also anticipates solid demand for Intel's products.
The broader semiconductor sector continues to attract investor attention. Citi's upgrade follows similar bullish calls on other chipmakers, including Micron Surges 10% as Analysts Boost Targets on AI-Driven Memory Demand and Intel Stock Surges 4% After BofA Upgrade, $135 Target on AI CPU Demand. These developments highlight growing optimism toward companies benefiting from AI-related spending.
This article is for informational purposes only and does not constitute financial advice.
