New AMD Price Target as Shares Reach New All-Time High
Bernstein analyst’s praise, continued benefit from Meta deal boosts the chipmaker.
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Shares of Advanced Micro Devices (AMD) rallied to an all-time high on Thursday, as the resurgence of stocks in the AI chip sector continued. AI chip names such as AMD, Nvidia (NVDA) , and Broadcom (AVGO) have sprung back to life after a multi-month period of consolidation.
AMD received a boost from Bernstein analyst Stacy Rasgon, who raised his target price on the stock to $265 from $235. Bernstein sees AMD’s product mix shifting away from PC chips, in favor of data center and server chips, which carry a higher profit margin.
Impact of Meta Platforms
Also cited was AMD's huge deal with Meta Platforms (META) , which Bernstein says will continue to benefit the company. In February, Meta and AMD entered a 6-gigawatt deal using custom versions of AMD’s chips.
Earlier this week, shares of Broadcom also soared thanks to a deal with Meta, which we covered here. Broadcom remains just 4% below its all-time high (black dotted line). The Palo Alto-based chipmaker’s rising 50-day moving average (blue) is about to cross above its rising 200-day moving average (red), a bullish sign (circled).
A Breakout With Authority
While Bernstein's bullish commentary on AMD came as welcome news, it still amounts to faint praise. The firm retained its “market perform” rating on AMD, and its new target of $265 is below the stock’s current price.
Meanwhile, AMD broke out with authority on Thursday, finishing 7.8% higher. The rally occurred on significant turnover, as the stock’s volume more than doubled from the previous day (arrow).
AMD’s New Price Target
How did we create our new price target for AMD? First, we measured the consolidation area (shaded yellow).
- The consolidation area runs from a low of $188 to a high of $267, a 79-point spread.
- Next, multiply 79 by .9. A move equal to 90% of the height of the consolidation area = 71 points.
- Finally, add $71 to the upper border of the pattern ($267) and our new target for AMD is $338.
Nvidia Closing In
Following in AMD’s footsteps, Nvidia is also on the verge of breaking out. This stock is clinging to the upper border (circled) of its recent consolidation (shaded yellow).
We’ll refrain from creating a new target for Nvidia until we see an actual break from the consolidation pattern. With the major indexes hitting all-time highs, that breakout could happen very soon.
Related: Let's Forget the 'We've Never Seen This Before' Stuff and Look a Little Deeper
At the time of publication, Ponsi was long AMD, AVGO and NVDA.
