AMD stock surges as robust AI-driven data center business boosts growth outlook

Reuters, November 4 - U.S. chip manufacturer Advanced Micro Devices (AMD.O) rose 7.3% in premarket trading after the company projected faster growth through 2027, reassuring investors that demand for artificial intelligence infrastructure (link) remains strong.

AMD recently joined the ranks of trillion-dollar companies. Its stock price has risen about 126% so far this year, and if the premarket gains hold, its market capitalization would increase by approximately $58 billion.

The company's strong outlook highlights the growing momentum of its server processor business, signalling that spending in the field of AI computing is gradually overtaking Nvidia's currently dominant accelerators.

“We are seeing growth in all areas—data center business, CPU business, and data center AI business,” CEO Lisa Su said, adding that the company has spent years preparing for this growth.

According to LSEG data, Su said on Tuesday that the company expects total revenue to grow by more than 80% by 2027, a pace above analysts' estimate of 77%.

Analysts at TD Cowen stated that AMD’s product roadmap and its expanding software ecosystem allow it to capture an important share of the AI market, while solidifying its position as the main alternative to Nvidia and driving further growth in its server CPU business.

Last week, shares of competitor Intel (link) plunged more than 20% after the company reported sluggish demand for personal computers, heightening concerns over its overreliance on the PC market and relatively limited presence in AI.

Analysts at Morgan Stanley expressed caution about whether current growth in the server CPU business can continue indefinitely amid industry-wide shortages, but believe AMD's execution surpasses its competitors', making further market share gains likely.

The company’s data center revenue surged 97% in the third quarter to $8.55 billion, surpassing analysts’ expectations of $8.20 billion.

This Santa Clara, California-based company currently trades at a price-to-earnings ratio of about 31, compared to 14 for Nvidia and 16.5 for Broadcom.

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