Advanced Micro Devices (AMD) shares climbed 2% in Tuesday trading after Wells Fargo raised its price target to $615 from $505, reiterating an Overweight rating. The revision reflects growing optimism around the company's server central processing unit (CPU) business, fueled by sustained demand from artificial intelligence (AI) workloads.
The new target, based on a price-to-earnings multiple of 33 times projected 2028 earnings, implies roughly 14% upside from Monday's close of $539.49. AMD currently trades at a P/E ratio of 179, underscoring the market's high growth expectations.
Wells Fargo Lifts Revenue and Earnings Forecasts
Analyst Aaron Rakers and his team increased revenue estimates for AMD's server CPU segment over the next three years. The brokerage now projects server CPU revenue of $16.0 billion in 2026, $20.5 billion in 2027, and $25.0 billion in 2028. Data center GPU revenue estimates were left unchanged at $15.6 billion for 2026, $40.6 billion for 2027, and $63.0 billion for 2028.
Earnings per share (EPS) forecasts were also raised: $7.15 for 2026, $13.40 for 2027, and $18.75 for 2028. The firm expects server CPU revenue to surge 68% in 2026, followed by annual growth of 22% to 28% through 2028.
AI Demand and Product Roadmap Drive Optimism
Wells Fargo's analyst team attributed the higher target to continued momentum in agentic AI, which is driving demand for server CPUs. AMD recently disclosed that production of its sixth-generation 2nm EPYC Venice server processors began ramping in late May, with volume production expected through the second half of 2026. The company noted that more customers are validating and ramping the Venice platform than any prior EPYC generation.
AMD also raised its estimate for the server CPU total addressable market to $120 billion by 2030. The next-generation 2nm EPYC Verano processors are slated for a 2027 launch, with a focus on AI performance per dollar and per watt.
Strategic Acquisitions and Ecosystem Investments
AMD announced the acquisition of MEXT, a firm specializing in AI-driven memory optimization technology. The deal aims to enhance AMD's AI portfolio by improving performance and lowering total cost of ownership for cloud and enterprise customers facing memory constraints.
Separately, AMD participated in a Series B funding round for cloud computing startup TensorWave, which closed at a $1.55 billion valuation. The investment supports TensorWave's plans to expand its infrastructure using AMD hardware and software, further strengthening AMD's position in the data center ecosystem.
Broader Analyst Sentiment Turns Positive
Several other brokerages have recently revised their outlooks on AMD. Cantor Fitzgerald raised its price target to $700 with an Overweight rating, citing continued compute market momentum. UBS increased its target to $670, pointing to gains in AMD's server CPU market share. Wolfe Research maintained an Outperform rating with a $450 target, highlighting progress in AI and GPUs.
For context on AI-driven demand across the semiconductor sector, see Seagate Shares Surge After Wells Fargo Upgrade on AI-Driven HDD Demand and Applied Materials Surges 7% as Meta's AI Chip Plans Boost Semiconductor Equipment Demand.
This article is for informational purposes only and does not constitute financial advice.
