TLDR
- Bank of America analyst Vivek Arya maintains a Buy rating on AMD with a $250 price target following an investor call with company executives.
- OpenAI’s first 1-gigawatt AI deployment is scheduled to ship in late 2026 using AMD’s MI450 Series racks, with total content valued at $15-20 billion per gigawatt.
- AMD will supply GPUs, CPUs, and DPUs directly to cloud service providers, potentially opening doors for more AMD-based projects.
- Wall Street expects AMD to report Q3 revenues of $8.73 billion, up 28% year-over-year, with earnings projected at $1.17 per share.
- AMD’s stock surged 24% following the OpenAI partnership announcement but now trades at 52 times forward earnings, more expensive than Nvidia.
Bank of America Securities analyst Vivek Arya confirmed his Buy rating on AMD following an investor call with CFO Jean Hu and VP Matthew Ramsay. The call focused heavily on the company’s expanding partnership with OpenAI.
Arya set a price target of $250, implying over 7% upside from current levels. He ranks No. 263 among more than 10,000 analysts on TipRanks with a 61% success rate.
The analyst said the call drew strong investor interest. Confidence in AMD’s AI plans increased following the detailed discussion.
OpenAI’s first 1-gigawatt AI deployment is scheduled to ship in the second half of 2026. Most shipments will arrive in Q4 using AMD’s MI450 Series racks.
AMD will supply GPUs, CPUs, and DPUs for the project. Total content is valued at approximately $15-20 billion per gigawatt.
The deal includes a small warrant impact of under 5%. Arya noted the agreement could expand as prices rise and networking components are added.
AMD will deliver directly to cloud service providers. This arrangement could open doors for more AMD-based projects in the future.
OpenAI’s Six Gigawatt Plan
OpenAI is motivated to complete all six gigawatts before October 2030 when its warrants expire. Arya called this a new growth driver beyond AMD’s current AI plans.
The warrants could be worth up to a 10% stake in AMD. At the company’s current market cap, that establishes a value around $33 billion for the full deal.
However, the deal is vested in various stages. Success depends on how much computing capacity actually gets built out.
Arya highlighted UALink, AMD’s new interconnect technology built on its proven Infinity Fabric. The technology represents a key step in improving AI systems and keeping AMD competitive.
Financial Outlook and Analyst Views
AMD is expected to report Q3 2025 results next month. Wall Street analysts project revenues of $8.73 billion, up 28% from the year-ago quarter.
Earnings are expected to increase by about 27% year-over-year to $1.17 per share. Investors will watch for updates on data center demand and AI partnership progress during the earnings call.
Wall Street maintains a Moderate Buy consensus rating on AMD stock. The rating is based on 27 Buys and 10 Holds.
The average price target sits at $237.59, indicating about 2% upside potential. AMD’s stock surged 24% following the OpenAI partnership announcement.
The stock is now approaching its all-time high established in early 2024. For comparison, Nvidia’s stock is up around 280% since the start of 2024, while AMD is up nearly 40%.
AMD’s data center GPUs have been deployed in small quantities but haven’t emerged as a viable alternative to Nvidia’s offerings. Custom AI accelerator chips from Broadcom have established themselves as better alternatives.
Broadcom recently announced a $10 billion sale in a custom AI accelerator chip largely linked to OpenAI. That was an actual order for chips rather than a staged warrant agreement.
Valuation Concerns Mount
AMD now trades at 52 times forward earnings. This makes it more expensive than both Broadcom and Nvidia despite having slower growth rates.
The premium valuation comes from the single OpenAI deal. AMD hasn’t yet established itself as a true Nvidia alternative in the AI space.
Nvidia’s new investment partnership with Intel could create additional challenges. Intel and AMD have long competed in the CPU space where AMD has made recent gains.
With Nvidia’s backing, Intel could regain ground. Many companies have already established an Nvidia ecosystem, and CPUs made specifically for Nvidia GPUs could give Intel an advantage.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
