GPU Upside Not Fully Priced-In; Upgrade to Buy w/$575 TP
CITI’S TAKE
While we have been constructive on the inflection in agentic AI led CPU demand and AMD to be the major beneficiary of it (see note), we now see AMD emerging as a legit second source in the GPU market with company poised to win lion’s share at Meta. Most investors currently view AMD as a CPU stock with stock pricing in ~60% probability of AMD achieving >$50B in GPU sales by 2028, in our view. Moreover, post Computex we lift our CPU 2030 TAM model to $137B from prior $132B and still expect AMD to be the key beneficiary of the CPU renaissance due to its performance leadership, greater core counts, X86 ISA, broader SKU offerings, and support for both multithreading and single threading. Our revised CY26/27/28 EPS estimates are 12%/13%/12% above Street and we upgrade AMD to Buy w/$575 TP on updated SOTP analysis.
U/G to Buy — We have increased conviction in the company exceeding the >$20 EPS goal by 2028. We raise our target price to $575 from $460 on growing AI business and server CPU tailwinds. We believe Meta will be a significantly larger customer of AMD’s AI products, especially GPUs, than the street is expecting. We increase our AI sales estimates and now expect $33 billion in 2027 (up 137% YoY) and $50.8 billion in 2028 (up 54% YoY). We value AMD using updated SOTP analysis with data center GPU/CPU biz at $281/$204 (35/30x 2028 PE), client $30 (15x), gaming $2 (8x), embedded $24 (20x), and net cash per share ~$35.
Meta GPU Upside — We believe Meta will be a significantly larger customer of AMD’s AI products, especially GPUs, than the street is expecting. We believe the use of custom MI450 GPUs is likely to provide Meta lower TCO vs merchant GPU products. Recall AMD announced a six-gigawatt, four year, 160M common stock warrant Meta deal for custom MI450 GPUs with first tranche of 1GW ramping in 2H26 and 2027. We estimate that each gigawatt translates to $15 billion for AMD.
Updated CPU TAM Post Computex — We believe the CPU TAM expands from $29.3 billion in 2025 to $136.7 billion (previously $131.5 billion) in 2030, or a 36% CAGR which is above AMD forecasted TAM of $120 billion by 2030.
Upgrade AMD to Buy w/$575 TP
We upgrade AMD to Buy from Neutral and raise our target price to $575 from $460 on increased conviction in AMD’s GPU business and server CPU tailwinds. We believe Meta will be a significantly larger customer of AMD’s AI products, especially GPUs, than the street is expecting. We value AMD using SOTP analysis with data center GPU/CPU biz at $281/$204 (35/30x 2028 PE), client $30 (15x), gaming $2 (8x), embedded $24 (20x), and net cash per share ~$35.
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