AMD stock pops on potential Amazon superchip deal, CEO bullishness

Brian Sozzi

Advanced Micro Devices (AMD) investors may be right to be programming their minds for more stock-price gains.

Shares of the semiconductor company popped over 2% in pre-market trading on Wednesday — and were Yahoo Finance's Top Trending Ticker — on a Reuters report that Amazon's cloud arm is considering using AMD's new AI chips.

A spokesperson for Amazon didn't return Yahoo Finance's request for comment.

The report comes a day after AMD unveiled high-powered AI chips dubbed the MI300, going up against Nvidia's own superchips.

The MI300 can provide up to 192GB of memory. The significant memory capabilities mean AMD's new chip could be applied in AI large language models, commonly known as "LLMs."

Winning business from Amazon Web Services would be a huge vote of confidence in AMD's fresh offerings, suggesting it has a shot at wrestling away chunks of market share from rival Nvidia.

In an exclusive interview on Yahoo Finance Live on Tuesday (video above), AMD's Chair and CEO Dr. Lisa Su struck an upbeat tone on the demand outlook for its AI chips once they begin to ship later this year.

"We're excited," Su said.

"We look at the data center. I mean, this is an incredible market. So if you think about just AI chips in the data center, we think this year it's about $30 billion market," Su added. "We think over the next three or four years it's going to grow over 50% every year. So it's going to be like a $150 billion market."

LAS VEGAS, NEVADA - JANUARY 04: AMD Chair and CEO Dr. Lisa Su delivers a keynote address at CES 2023 at The Venetian Las Vegas on January 04, 2023 in Las Vegas, Nevada. CES, the world's largest annual consumer technology trade show, runs from January 5-8 and features about 3,100 exhibitors showing off their latest products and services to more than 100,000 attendees. (Photo by David Becker/Getty Images)
AMD Chair and CEO Dr. Lisa Su delivers a keynote address at CES 2023 at The Venetian Las Vegas on January 04, 2023, in Las Vegas, Nevada. (Photo by David Becker/Getty Images) (David Becker via Getty Images)

Su declined to unveil the pricing on the M1300 but said she expects AMD will be able to make enough chips in 2024 to meet any voracious demand.

Investors sent AMD shares down 3.6% on Tuesday amid some disappointment about the lack of details on pricing for the new chips and launch customers.

But Wall Street still came away impressed and believes AMD will be a key player in the coming AI wave suggested by the likes of Salesforce CEO Marc Benioff to Yahoo Finance this week.

"While its ecosystem is not as mature as Nvidia, AMD is well positioned to be a key beneficiary of AI secular growth trends for the medium term, in our view," Baird analyst Tristan Gerra said in a research note.

Gerra lifted his 2024 EPS estimate on AMD to $5.50, from $4.09. Consensus estimates are at about $4.13 a share for 2024, according to Yahoo Finance data.

The analyst maintained an Outperform rating on AMD shares.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com

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