Advanced Micro Devices (NASDAQ: AMD) saw its shares climb more than 5% in Monday's trading session after Oppenheimer raised its rating on the chipmaker to Outperform from Perform, setting a price target of $600. The new target implies an upside of over 33% from Friday's closing price, reflecting optimism about the company's data center business and the accelerating adoption of artificial intelligence processors.
According to Investing.com, Oppenheimer's analysts lifted their estimates for AMD following a review of the company's latest earnings call and discussions with CFO Jean Hu and investor relations vice-president Matt Ramsay. The brokerage highlighted that EPYC processors and initial shipments of the MI455 and Helios platforms contributed to approximately double-digit data center growth in the third quarter.
Oppenheimer expects the data center segment to expand significantly through 2027, with sales of data center GPUs eventually surpassing revenue from EPYC server CPUs. The firm models around 3 gigawatts of GPU deployments in 2027 and 4 gigawatts in 2028, projecting data center revenue to increase 135% next year and account for 85% of AMD's total sales.
The brokerage also anticipates that OpenAI and Meta will support demand through the first quarter, with Anthropic ramping up deployments toward the end of that period. Demand for computing infrastructure remains robust, as the five largest cloud service providers are expected to spend approximately $1.3 trillion on capital expenditure in 2027, compared with $800 billion this year.
AMD's recent financial results underscore its business momentum. Fiscal third-quarter revenue rose 45% year over year to a record $13.4 billion, while adjusted earnings per share increased 74% to $2.09. Data center revenue nearly doubled to $8.5 billion, up 97%, supported by EPYC processors and the launch of Instinct MI450 Series GPUs.
The company expects fourth-quarter revenue of approximately $17 billion, implying growth of 66% at the midpoint of its guidance. CEO Lisa Su said AMD expects company-wide revenue growth to exceed 80% in 2027, with server CPU revenue projected to nearly double and data center AI revenue expected to grow considerably faster. Su also indicated that AI revenue from data centers should surpass server CPU revenue in the fourth quarter of 2026.
However, AMD faces a supply challenge as demand continues to outpace available capacity. The company is working with suppliers to expand production as it prepares for wider Helios deployments. AMD has also committed to an annual product cadence, with MI500 expected in 2027 and MI600 in 2028, to maintain competitiveness in the rapidly expanding AI chip market.
The stock also received a relative boost as Nvidia shares fell nearly 7% on Monday following reports of a probe into CEO Jensen Huang's relationship with a businesswoman identified by intelligence agencies as a Chinese spy. This added to the appeal of AMD as the closest GPU rival.
This article is for informational purposes only and does not constitute financial advice.
