AMD Stock: Look for Steady Returns, Not Moonshot Moves

Stock Market

Advanced Micro Devices (NASDAQ:AMD) goes through phases in the market. Sometimes stock traders love AMD, but other times they have misgivings about the company. Nevertheless, levelheaded investors can choose to hold AMD stock or only buy a few shares, and we’re assigning the stock a “B” grade .

When all is said and done, AMD is still a premier chipmaker. The demand for artificial intelligence enabled chips isn’t going to evaporate anytime soon. Sensible investors should be aware of AMD’s challenges, especially during a time of international tensions and conflicts.

AMD Stock Gets a Moderately Bullish Price Target

It’s fine to be optimistic, but investors also need to be realistic. Whether you’re buying AMD stock or just holding it, today’s a good day to consider your price target. The most reasonable outlook in 2024 is moderate growth, not a moonshot.

In that vein, Baird analysts reiterated their “outperform” rating and set a $200 price target on AMD shares. This implies some upside for the stock, but nothing outlandishly optimistic.

The Baird analysts expect “comfortable upside” to AMD’s AI revenue guidance for the year. For the current quarter, AMD expects to generate revenue of “approximately $5.4 billion, plus or minus $300 million.”

That’s not too ambitious at all, as AMD reported $6.2 billion in revenue for 2023’s fourth quarter. We won’t try to predict AMD’s current-quarter and full-year revenue right now. Still, the Baird analysts seem to have a sensible outlook as they aren’t asking too much of AMD stock.

AMD’s Potential Problems in China

Don’t get the wrong idea. There may be “comfortable upside” in AMD’s AI revenue, but it won’t always be smooth sailing for the chipmaker.

AMD may wobble on the way to $200 because of challenges in China. That’s an important market, as 15% of AMD’s revenue derives from mainland China.

That’s why the Sino-U.S. chip war could be problematic for AMD’s bottom line. In March, Beijing announced that chips from AMD and Intel (NASDAQ:INTC) will be phased out of government PCs and servers in China.

The U.S. government had already placed restrictions on exports of certain high-tech hardware components to China.

Now, China’s government is directing “the nation’s largest telecom carriers to phase out foreign processors that are core to their networks by 2027,” according to The Wall Street Journal. Thus, it appears that China isn’t backing down in the technology war.

The Journal added that AMD and Intel will be hit the hardest as they have, in recent years, “provided the bulk of the core processors used in networking equipment in China and the world.” Consequently, AMD’s shareholders should keep tabs on this ongoing story to see if impacts the company’s quarterly financial results.

AMD Stock: Look for $200, but Don’t Over Invest

AMD is an international company, and it has to deal with international tensions sometimes. With U.S.-China tech-war conflict brewing, it’s prudent for investors to refrain from over-investing in AMD this year.

This doesn’t mean you have to completely lose faith in AMD, however. The company should still be able to generate robust revenue from its AI chips. So, Baird’s $200 price target for AMD stock is a reasonable expectation, and we’re confident in assigning a “B” grade to the stock.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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