Investing

This AI Stock Surged 11%, and Could Surge Another 16% in 2025, According to Analysts

Chris MacDonald

Published: January 26, 2025 10:01 am

The artificial intelligence (AI) revolution is firmly upon us, and investors everywhere are scrambling to gain exposure to companies heavily involved in the space. Of course, it’s possible to invest in the companies that are directly involved in the production of AI applications and the technologies consumers use. But there are other ways to play this space, from the hardware and software required (provided by chip makers) to energy, storage, and other related services tied to this sector.

One top chip stock benefiting from surging demand for AI applications is Advanced Micro Devices (NASDAQ:AMD). This company largely operates in Nvidia’s (NASDAQ:NVDA) shadow – a rather large shadow at that – providing competing chips for clients with high-performance computing needs.

AMD has certainly capitalized on growing AI infrastructure needs, with strong demand for Instinct MI300 GPUs driving a 122% year-over-year increase in data center revenue last quarter. This segment became AMD’s largest revenue source entering 2025. Additionally, its Epyc CPUs saw robust demand, with Meta Platforms deploying over 1.5 million units in its data centers.

AMD significantly increased research and development efforts, hiring engineers and launching the MI300 GPU, with plans to capture a share of the projected $500 billion AI accelerator market by 2028. Despite strong data center chip demand driving a 31% year-over-year earnings growth last quarter, AMD trades at just 24-times 2025 earnings estimates, around the market average. This undervaluation positions the stock for a potential rebound and wealth-building returns, and is a key reason I think this is an AI beneficiary worth owning right now.

Key Points About This Article:

• AMD’s AI chips drove 122% data center growth, targeting a $500B market by 2028.
• Analysts see 40% upside for AMD, with a $172.24 target by 2025.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Analyst Forecasts for 2025

As it happens, most analysts appear to agree with this view.

Now, the range of analyst forecasts for AMD stock in 2025 is quite impressive, though most analysts believe in the company’s robust foundation for prospective growth. With a consensus price target of $172.24 per share (more than 40% upside from current levels), it’s clear that analysts as a whole are believers in the company’s underlying growth catalysts.

Analysts have projected forward continued strength into 2028 and beyond, with longer-term price targets of $250 per share by 2028, $300 per share by 2030 and $400 per share by 2034 put out there by some analysts.

Over the next five years, earnings are expected to grow above-sector average, with these bullish projection built upon the company’s continued focus on innovation and providing semiconductor technologies that will remain in high demand. Economic factors could derail these projections, but tis’ clear that most in the market put forward a favorable view of this stock’s capital appreciation upside potential.

Not all analysts agree, however. Bank of America downgraded the stock to “neutral” in December, with the firm reducing its price target to $155 per share. However, Citigroup and TD Cowen maintained “buy” ratings with targets of $200 and $185, respectively. So, broadly-speaking, even the more “bearish” analysts on the street still see substantial upside for AMD, painting a picture of how robust this sector is projected to grow by nearly all involved in the space. 

Why AMD Is a Stock to Own

AMD’s Instinct accelerator chips target the AI market, where Nvidia currently leads. However, major tech firms like Microsoft and Meta are diversifying suppliers, creating opportunities for AMD.

While AMD’s Q3 data center revenue is just 10% of Nvidia’s, the AI chip market is projected to grow from $61.4 billion in 2023 to $632 billion by 2032, per experts. AMD CEO Lisa Su expects the market to be much larger over the next few years, meaning this chip maker doesn’t need to lead this market to see substantial growth, but simply participate over time.

For now, AMD’s forecasts suggest that the company will be able to sell as many chips as it can produce, and the company is clearly focused on ramping up production. As AI-driven data center revenue surges, this is a stock that could continue to provide big upside potential for investors. Triple-digit growth rates may not last forever, but trends certainly point in a favorable direction for AMD and its peers.

Personally, I think the Street’s estimate of 27% revenue growth for 2025 may be light, and think this stock looks relatively attractive at its current multiple (compared to its peers).