New AMD Price Target as OpenAI News Closes Gap With Nvidia
After reportedly striking a multi-billion-dollar agreement with the AI firm, Advanced Micro Devices will obliterate our previous target price.
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Never, ever underestimate Lisa Su.
Why? She's the grooviest. That's why.
Gang, there's a reason why we never give up on Su. Readers may recall that in past weeks, I had written that I was remaining long both Nvidia (NVDA) and Advanced Micro Devices (AMD) , but that neither was still a core investment. AMD had remained in my top 10, but not my top five, while Nvidia had been pushed out of my top 15. I had made some room for other chip stocks such as Micron Technology (MU) and Intel ( in my most active book. However, I made clear that among my chip names, AMD was still my most heavily weighted.
Well, on Monday morning, AMD is easily back in my top five. No, I have not bought or sold any shares just yet. The stick is up a screaming 35% or so ahead of the opening bell in New York. Will I have to act? Of course. Will I have to update my target price? Of course. So, let's talk about Advanced Micro Devices, shall we?
The News
On Monday morning, The Wall Street Journal reported that AMD and OpenAI had announced a multi-billion-dollar partnership/collaboration where AMD-designed chips will be used to power OpenAI's AI-related infrastructure and data centers. Under the terms of the deal, AMD has issued warrants for up to 160 million shares which will vest upon the reaching of certain milestones. The first tranche will vest with the initial deployment of 1 gigawatt and will scale up to six gigawatts of AMD GPUs over multiple years.
Next year's AMD Instinct MI450 series chips will be used. Those chips will either be purchased directly by OpenAI or through its cloud computing partners. Vesting will be based on AMD's share-price targets and to OpenAI's ability to achieve certain technical and commercial milestones as well as simply gigawatts provided. There is known to be at least one tranche with an exercise share price for AMD of $600 per share.
There's More
OpenAI is known to be backed by Microsoft (MSFT) ; Softbank; a group of U.S. banks including Wells Fargo (WFC) JP Morgan Chase (JPM) , Goldman Sachs (GS) and Citigroup (C) ; as well as Oracle (ORCL) ; and, ironically, Nvidia. NVDA is trading lower on the news. This deal is AMD's largest win in its chase for market share. Nvidia is easily the dominant player in the AI-capable chip design space. AMD may have been in second place, but it was a distant second place. A lot less distant as of Monday morning.
OpenAI has plans to use AMD GPUs for functions prioritizing inference. Remember, we told readers that Su was prioritizing inference. How quickly that tree bore fruit. Su basically elected to stop wasting efforts chasing Nvidia on designing chips built to aid large language models and other associated tools and go down a route that she felt underserved.
Now, demand for inferencing capable chips is apparently soaring. OpenAI might be the first big deal. Will OpenAI be the last? Oh, and for those that thought that the big up-spend on generative and agentic AI might be slowing? Survey says... XXX!
The Chart
Obviously, AMD will obliterate my $188 target price (which was drawn from $209) on Monday morning.
That does mean that discipline demands at least a take sale today. The cup pattern that we have been discussing, will obviously not develop a handle, but instead a gap-up opening that could at some point fill. This leaves the pivot on the left side apex of the cup close to $187.
Going off of that pivot, my target price would be $234. so there could be another bit of profit taking in the offing. I won't be going heavy on these sales, just as an FYI. Only about 2.6% of AMD's float is held in short positions, so while there will be some short coverings, the rally is largely organic.
Plan for Advanced Micro Devices (AMD)
- Take a little something off our long position on Monday morning
- New target price: $234, up from $188
- Add: As the last sale and 50-day SMA (now $166) draw closer
- Panic: Don't. If entering the stock today, use the 8% rule.
At the time of publication, Guilfoyle was long AMD, MSFT, WFC, JPM and NVDA equity.
