AI stocks were battered on Monday, Sept. 14, as investors confronted the possibility that the breakneck pace of growth could slow down. Chip stocks sold off sharply as warnings from Anthropic, OpenAI, and others revived fears that the costly data-center buildout could potentially lose momentum.
Bank of America, though it disagrees with that interpretation, argues it misses the point of what’s actually driving the spending cycle. AI is too strategically important for the big players to step aside in a big way, and that has major implications for Advanced Micro Devices (AMD) stock.
In a fresh note shared with me, BofA sees something much closer to an arms race than a coordinated slowdown. According to the bank, U.S.-China competition, hyperscalers battling neoclouds, sovereign programs, and frontier labs all have pretty strong incentives to continue shelling out billions even if everyone would prefer a more measured pace.
That comes as BofA raised its S&P 500 price target to 7,400 from 7,100, which, interestingly, still implies 3% to 4% downside from current levels, as my colleague Hillary Remy reported.
So the bank remains bullish on semiconductors despite the near-term choppiness.
Compute is the area it believes is most likely to hold up, with AMD and Nvidia (NVDA) stocks specifically highlighted.
BofA argues that the tech giant can benefit not only from a much larger AI spending pool but also from gaining share within it, creating a superb earnings-growth setup that investors are underestimating.
BofA sees two engines behind AMD stock’s next leg
Bank of America sees AMD benefiting from a couple of forces at once: a rapidly growing compute market and the potential to take a bigger share of it.
BofA places AMD alongside Nvidia in its preferred compute bucket, expecting resilience from both, even as other parts of the semiconductor complex continue to trade with high volatility.
Moreover, networking names such as Marvell Technologies (MRVL) and analog players, including Analog Devices and onsemi, also make the cut. At the same time, memory and semiconductor equipment stocks may need stronger momentum before leadership returns.
More Wall Street:
- Wall Street’s AI trade faces its biggest valuation test
- The next Wall Street shift is already underway
- Wall Street sends strong 4-word verdict on the stock market
For AMD, veteran analyst Vivek Arya maintains a $620 price target, based on 27 times estimated 2028 non-GAAP earnings. That multiple is largely in line with AMD’s historical forward median, suggesting the bank isn’t relying on an extreme valuation expansion to make the math work.
At the $516.13 share price used in the report, that target implies a massive 20% upside.
The most pivotal piece of BofA’s thesis is growth.
The bank sees 50%+ annual EPS CAGR potential, led by share gains across AI GPUs and CPUs. In other words, AMD needs to win more of that market from its peers, which gives its investors both broader market growth and company-specific share gains.
Recent operating results make the argument a lot easier to take seriously. AMD’s Q2 revenue jumped 50% year over year to a record $11.54 billion, while Data Center sales surged 107% to $6.72 billion, equating to around 58% of total sales.
Data Center operating income surged to $2.1 billion, with segment margins near 31%, while companywide non-GAAP gross margin jumped to 56%.
These numbers underscore that AMD is already becoming more data-center-heavy, more profitable, and a lot less dependent on its historically slower-cyclical businesses.
AMD’s biggest risk is no longer just the chip
BofA’s clearest risk to AMD’s bull case centers around its MI400 Series, and that risk is a lot bigger than a routine product-launch concern.
With Helios, AMD is looking to move beyond selling individual accelerators and compete at the full rack-scale level.
The robust platform covers Instinct GPUs, EPYC CPUs, Pensando networking, and ROCm software, competing with Nvidia’s Vera Rubin offering. That also means AMD now needs to prove it can deliver an integrated system, rather than just a competitive chip.
The opportunity is substantial.
Anthropic is looking to deploy up to 2 gigawatts of MI450 Series GPUs in Helios systems, with the first gigawatt expected in the first half of 2027. Microsoft (MSFT) is also planning to deploy Helios at scale on Azure for frontier-model inference.
That makes execution critical to its bull case.
If Helios performs as expected, AMD can strengthen its position against Nvidia and capture a much larger share of the overall AI stack.
Moreover, Arya also flags multiple less obvious risks.
He argues that the uncertainty around the timing of Middle East AI projects, lumpy enterprise and consumer spending, and the dependency on a single outsourced manufacturing partner are other noteworthy issues.
The Middle East risk, in particular, can be substantial, as sovereign AI projects tend to be large yet uneven. Delays might destroy long-term demand but can shift sales between quarters and make growth look a lot less predictable.
That leaves AMD with a strong upside setup, but also one where execution matters more than ever.
What AMD investors should watch before the next earnings test
For AMD investors, BofA’s argument boils down to whether Wall Street is discounting AI durability too aggressively.
Despite a 67% year-to-date gain in the SOX ETF, semiconductors trade at nearly 19 times forward earnings, roughly even with the S&P 500, even as they post 139% year-over-year EPS growth.
On a 24-month basis, BofA feels the group trades at an 11% discount to the market while offering around twice the expected growth.
AMD is the cleaner way to test that thesis, as BofA expects both sector-wide expansion and company-specific share gains.
The next major checkpoint is Q3 earnings.
AMD is widely expected to announce earnings on Nov. 3, according to Yahoo Finance. The company itself guides to roughly $13 billion in sales, plus or minus $300 million, implying 41% year-over-year growth and 13% sequential growth, with non-GAAP gross margin near 56%.
Importantly, the current market consensus is at nearly $12.97 billion in sales and $1.93 EPS as reported by Investing.
That said, investors should watch three things: data Center growth, Helios/MI400 deployment commentary, and gross-margin durability. If those impress, BofA’s thesis becomes a lot easier to defend.
Related: Elon Musk sends strong signal for SpaceX, Nvidia stocks
