Batten down the hatches, people, the market is heading straight into some wild weather.
First, we have the Federal Reserve, which starts a two-day meeting on Tuesday, April 30. It is expected on Wednesday to keep its key federal funds rate at 5.25% to 5.5%, the level it has stayed at since last July and the reason all interest rates remain high.
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In addition, the April jobs report comes out Friday and is expected to show unemployment holding at 3.8% and payroll growth of around 240,000.
And then we have a total of 175 S&P 500 companies scheduled to report earnings this week. The roster includes stellar names like Apple, Amazon, Eli Lilly, and, dear readers, Advanced Micro Devices (AMD) .
AMD is slated to report first-quarter earnings on Tuesday and one Wall Street firm sees the semiconductor company as a “battleground” stock worth tracking.
Analysts surveyed by FactSet expect AMD, engaged in an ongoing war for market share with AI chip-making titan Nvidia (NVDA) , to report 62 cents per share on $5.48 billion in revenue.
In January, AMD reported fourth-quarter earnings of 77 cents per share, up from 69 cents in the year-ago quarter, matching the FactSet consensus.
Revenue totaled $6.17 billion, up from $5.60 billion in the year ago quarter and beating FactSet’s call for $6.13 billion in sales.
AMD CEO Lisa Su faces slow demand for core chips but sees accelerating demand for AI chips.
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Analysts cite ‘mixed conditions’ despite AI push
AMD said its MI300X, a graphics-processing unit designed to support generative artificial intelligence technologies, was expected to produce around $3.5 billion in sales over the coming year as the company leveraged its new launch against Nvidia’s ability to meet the global surge in demand.
In October, AMD said it expected $2 billion in server GPU sales in 2024.
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CEO Lisa Su told analysts during the fourth-quarter earnings call that revenue had been driven by “a significant double-digit percentage growth” in the company’s data center and client segments.
Data center revenues, including the company’s suite of new AI-focused chips, rose 38% to $2.3 billion.
The client segment, which includes personal computing, saw a 62% revenue surge to $1.5 billion.
AMD said data center revenue would be flat in the first quarter, with seasonal declines in server central processing units (CPUs) offset by sales of graphics processing units (GPUs), which are needed to train and deploy generative AI models.
Analysts reviewed their stock price targets for AMD ahead of the Santa Clara, Calif.-based company’s earnings report.
Morgan Stanley analysts cut their price target on AMD to $177 from $193 while keeping an overweight rating on the shares.
AMD is one of the biggest “battleground” stocks this earnings period amid mixed conditions in the core business and longer-term questions in AI around Nvidia’s coming Blackwell chip, the firm said.
Analysts said that, regarding its core business, chips for PCs and laptops, they believe that AMD’s first-quarter and second-quarter guidance should be roughly in line.
Demand for chips used in PCs looks slightly weaker than seasonality suggests ahead of the second quarter, but servers should be stronger. Also, XLNX is bottoming out, the firm said, referring to AMD’s $49 billion acquisition of chip company Xilinx, completed in 2022 and described as the largest chip deal in history.
Analyst sees ‘broad-based recovery’
Morgan Stanley said its view is constructive in the longer term, but given those factors, it doesn’t see this quarter as a catalyst.
Analysts at Bank of America maintained their buy rating on AMD and a $195 per share price target. The firm expects continued server strengths to more than offset the ongoing PC correction and embedded/gaming resets in the first and second quarters.
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In a note entitled “Core Wars,” BofA said it expects server CPU inventories to normalize generally following a 33% year-over-year shipment decline in 2023.
By the second half, BofA said it expects a “broad-based cyclical recovery of non-AI segments” on easier half-on-half versus year-over-year comparisons, with AI revenues accelerating on new Epyc Turin, MI300X ramps.
Susquehanna lowered the firm’s price target on AMD to $185 from $200 while keeping a positive rating on the shares.
The firm expects in-line guidance to be slightly weaker as Server/PC/XLNX/Gaming continue to weigh on results
Guidance for its MI300x AI chips will be a key focus for investors.
Last week, Deutsche Bank analysts maintained their hold rating and $150 price target on AMD, telling investors that the firm expected the company’s fundamentals to “remain bifurcated” as data center and AI goodness is partially offset by ongoing cyclical challenges across client, gaming, and embedded.
“Overall, the dimming of AI enthusiasm in recent weeks has presented an intriguing pullback in AMD shares for some, and we have high confidence in management’s ability to continue to convey a positive AI-related message on the earnings call,” said Deutsche Bank.
“However, with shares still in-line with our price targets, we believe AMD is fairly valued and thus maintain our Hold rating,” the firm said.
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