AMD's stock hasn't been feeling the love. Here's why that could change.

By Emily Bary

AMD and Nvidia shares have been on different tracks in recent months, but one analyst says AMD 'deserves more attention'

It's Nvidia Corp.'s world, and Advanced Micro Devices Inc. is just living in it.

Or, at least, that seems to be the vibe given their contrasting stock reactions. Though the chip makers are levered to the same artificial-intelligence trend, AMD shares (AMD) are off 21% over the past three months, while Nvidia shares (NVDA) are up 29%.

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Of course, there are some big differences between the two. Nvidia, which briefly crossed above a $3 trillion valuation earlier this week, is vastly ahead in terms of recognizing financial benefits from AI. And since the company's AI accelerator business has gotten so big, Nvidia is less impacted by cyclical pressures elsewhere in the chip sector that are dogging other players.

Still, Melius Research analyst Ben Reitzes thinks investors should be giving AMD more credit than they are currently. He noted that there wasn't "much love" for AMD after Chief Executive Lisa Su's Computex keynote, perhaps because Nvidia "rented out a 7,000-person venue the night before and stole her thunder."

"But remember - AMD doesn't need to be Nvidia - it's only 9% of its market cap," Reitzes wrote. "We think AMD deserves more attention, having underperformed Nvidia by 131 points [year to date] - but with [earnings-per-share] power that could top $8 within a few years."

Reitzes is encouraged that Facebook parent Meta Platforms Inc. (META) endorsed the benefits of total cost of ownership for AMD's MI300X AI accelerator "and no one noticed."

"Behind the scenes, we think Meta's AI orders are set to kick-in further" in the second half of the year, he said.

Reitzes also likes the specifications for AMD's Strix Point AI PC processors, which he said "are impressive and could be driving client upside" as soon as the third quarter.

Plus, he got an upbeat sense from management in recent meetings. "We met with AMD this week - and think it could be one of the beneficiaries of a catch-up trade coming out" of this quarter, he wrote. "One thing that would help perhaps is if it got closer to buy-rated Arista Networks (ANET) in networking so investors (and customers) got more confidence in its ability to deliver systems."

AMD shares were up as much as 1.6% earlier Friday, but they've since pulled back to be up just fractionally.

Read: This chart shows Nvidia's meteoric rise as 'Jensenity' continues

-Emily Bary

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06-07-24 1507ET

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