AMD stock gets a higher price target. Focus on its AI chip business, analyst says.

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Cowen says investors should ignore any near-term weakness in Advanced Micro Devices’ business and look to the chipmaker’s growth prospects in the artificial intelligence semiconductor market.

On Tuesday, analyst Matthew Ramsay raised his price target to

AMD

stock (symbol: AMD) at $135 instead of $115. He also reiterated his outperformance rating.

AMD shares rose 2.9% to $114.58 on Wednesday.

“In the near term, we continue to see a decidedly mixed environment for AMD,” he wrote. “We believe that investors’ attention after earnings will again turn longer-term to AMD’s strong data center outlook, including a crystallized AI strategy supported by stronger products.”

PC industry sales have been weak in recent quarters. Global PC shipments fell 13% in the June quarter from a year earlier, according to research firm IDC, which cited a weak macroeconomic environment and weak consumer and business demand. IDC also said technology budgets have shifted away from hardware devices after the pandemic. That’s not good news for AMD, which derives much of its revenue from computer processor sales.

But AI could be a boon for AMD. The analyst expects AMD to have a multi-billion dollar opportunity for its new AI chips by 2025. He predicts AMD’s business will improve later this year with stronger performance in the over the next two years.

“AMD lays the groundwork for an increasingly impressive set of offerings in the face of greater AI TAM [total addressable market] where customers are crying out for competition,” he wrote.

Nvidia

is the current market leader in chips used for AI applications.

AMD stock is up about 50% in the past 12 months, compared to a 46% rise in the

iShares Semiconductor Exchange Traded Fund

(SOXX), which tracks the performance of the ICE Semiconductor Index.

Email Tae Kim at tae.kim@barrons.com