Advanced Micro Devices analyst sets eye-popping price target

The artificial intelligence revolution has been long in the making, but it really gained widespread mainstream appeal after OpenAI released ChatGPT, a large language model millions now use to search, parse, and create content.

ChatGPT's success has unleashed a flood of interest in developing AI, and that's, in turn, been a boon to technology companies serving the enterprise and hyperscaler networks that companies and governments are using to train and run AI apps, including Advanced Micro Devices  (AMD) - Get Free Report.

AMD isn't at the forefront of next-generation chips used in AI yet, but optimism has swelled that it could significantly challenge Nvidia  (NVDA) - Get Free Report for AI chip dominance in 2024.

The potential for AMD to eat away at Nvidia's lead has caused shares to soar since October, leading many to wonder what could happen to its stock next. 

Real Money analyst Bruce Kamich recently updated his analysis of AMD, including a new price target that may cause some jaws to drop.

AMD bets big on an AI wave of demand

Generative AI applications like ChatGPT only hint at the potential for AI programs. Companies big and small are investigating how AI can streamline business practices, find cost savings, and improve operations.

Related: Nvidia extends record run as robust AI chip demand offsets China concern

JP Morgan Chase is using artificial intelligence to hedge financial risks. Healthcare companies are exploring using AI to design drug molecules and predict efficacy. Manufacturers are using it to improve supply chains. Retailers are exploring how AI may help curb theft.

The applications are seemingly endless. However, existing network infrastructure that relies heavily on traditional Central Processing Units, or CPUs, is ill-suited to the task of training and running AI efficiently. 

The heavy workloads associated with AI programs require significant computing power, and existing servers don't have the muscle to do the job. As a result, corporate networks are investing in next-generation chips that were previously mostly used in high-performance gaming or cryptocurrency mining.

Those investments in Graphic Processing Units, or GPUs, have been a boon to Nvidia, the market share leader. Nvidia's revenue has skyrocketed since the second quarter of 2023. For example, Nvidia's revenue topped $18 billion in Q3, up 206% year over year, because of surging AI-related demand.

The potential associated with rebuilding network infrastructure to handle AI isn't lost on Advanced Micro Devices' CEO Lisa Su. AMD has long been Nvidia's most formidable competitor in the GPU space, and in 2023, Su promised next-generation chips would soon challenge Nvidia.

Those chips, the MI300, will be available this year. They won't be cheap, but they will be profit-friendly. Su recently said the market for AI chips could be as big as $45 billion in 2024 and grow to $400 billion by 2027.

Advanced Micro Devices charts result in a new price target

Kamich has analyzed price charts professionally for over 50 years. He uses price, volume, and technical analysis indicators, such as momentum, to gain insight into the aggregate sentiment of investors, including big money mutual and hedge funds with resources unavailable to Main Street investors.

More Business of AI:

• The ethics of intelligence: A path towards responsible AI
• Google targets Microsoft, ChatGPT with huge new product launch
• AI is a sustainability nightmare – but it doesn’t have to be

Kamich updated his analysis of Advanced Micro Devices on Jan. 16, including setting a new price target that shareholders will cheer.

"In the weekly Japanese candlestick chart of AMD, below, I see a bullish picture," says Kamich. "The shares trade above the rising 40-week moving average line. The weekly OBV line shows us gains since October 2023. The MACD oscillator is in a bullish alignment above the zero line. A test and possible break of the 2021 highs look possible."

On-balance volume is essentially a measure of up minus down day volume. The moving-average convergence divergence oscillator is a momentum indicator.

Kamich also calculated price targets using daily and weekly point-and-figure charts. Those charts suggest an impressive upside to $187 and $264, respectively. Since AMD shares are only trading at around $160 currently, Kamich's targets represent a significant potential upside.

P&F charts don't predict when stocks will achieve specific price targets. Nevertheless, Kamich's price targets and technical analysis suggest the risk-reward for AMD stock is enticing.

"Traders who are long could look for gains to the $187 area, but they need to raise sell stops at least to $138 to protect gains," concludes Kamich.