Advanced Micro Devices Earnings: Squarely in AI Accelerator Mix; Maintain Valuation

Narrow-moat Advanced Micro Devices reported solid second-quarter results and gave investors a healthy outlook for the rest of 2023. We’re most encouraged by the firm’s disclosure that its artificial intelligence customer engagements “grew by more than seven times sequentially,” as the firm is poised for a strong ramp of AI graphics processing units starting in late 2023 and into 2024. We remain optimistic about Advanced Micro Devices’ chances to emerge as a second source to Nvidia in GPUs in AI training and inference. We maintain our $130 fair value estimates and view shares as fairly valued.