AMD's AI-Powered Stock Price Rally Just Shifted Gears
Advanced Micro Devices' long-awaited AI stock price rally is underway following a new deal announcement and an increase to the buyback.
This story originally appeared on MarketBeat
Advanced Micro Devices' (NASDAQ: AMD) long-awaited AI-powered stock price rally is here. The stock is rocketing higher after a string of good news, including reduced trade tensions with China, a new deal with Saudi Arabia's HUMAIN, and a new $6 billion share buyback authorization. The authorization, a sign of the board's confidence in future free cash flow, is worth an additional $6 billion on top of the $4 billion left under the existing.
The total $10 billion in potential share repurchases is worth about 5.5% of the market cap in mid-May and a potentially strong tailwind. It is potentially strong because repurchase activity in 2024 failed to reduce the count, stock-based compensation awards more than offset their impact and may do so again in 2025. However, the first quarter results included a slight reduction in the diluted count that may persist and even accelerate as the year progresses.
Other figures that investors should be watching are the cash, assets, and equity, which are all increasing. The company's Q1 balance sheet highlights included a 50% YOY increase in cash, increased receivables and inventory, steady debt levels, and reduced liability. The net result was a 5% increase in equity and an expectation for equity gains to accelerate as the year progresses. The outlook for the year was amplified by recent news, including a $10 billion deal with HUMAIN.
HUMAIN, Saudi Arabia's newly formed AI enterprise, inked a $10 billion deal for AI infrastructure backed by President Trump. The deal involves 500 megawatts of AI compute capacity using AMD's most advanced semiconductor technology and is expected to play out over five years.
The impact on AMD's outlook is significant and worth 3100 basis points of revenue growth relative to the 2025 consensus forecast reported by MarketBeat.
Analysts Cheer Eye-Opening Moment for AI Investors
The analyst's response to the Saudi news was overwhelmingly bullish. Bank of America analysts view Advanced Micro Devices as a top-winner alongside NVIDIA (NASDAQ: NVDA), while the Dan Ives-led Wedbush team called it an eye-opening moment. They view the deal and the others announced alongside it as a clear signal that Saudi Arabia will be a significant player in AI for years to come.
Saudi Arabia's AI investment could top $1 trillion within years and open the door to expanding possibilities for all things AI. Ultimately, the factor that matters is that the analyst group is lifting price targets again and leading to the high-end range, a gain of 50% relative to mid-May trading levels.
Advanced Micro Devices' upcoming Q2 earnings release, scheduled for late July, will be a market-moving event for this stock. Not only is there a high probability that the company will outperform its consensus estimates for revenue and earnings, but the guidance will likely be strong.
Demand was strong before the Saudi deal and will only increase in its wake. The risk is China. The curb on exports to China will impact the results, but may be limited. Saudi Arabia will make up for the lost revenue.
Advanced Micro Devices Stock Price Reaches a Critical Pivot Point
Advanced Micro Devices' stock price advanced by 15% within two days of the HUMAIN announcement and will likely continue to move higher. However, there is a risk of resistance at a critical pivot point, including the long-term 30-week EMA, representing institutional buy-and-hold investors.
If the market is unable to get above the level quickly, there is a risk that AMD's share price will remain range-bound at current levels. A move above the 30-week EMA would be a bullish sign, indicating improved market sentiment and an all-clear to investors. The market for AMD stock would likely move up to $147.50 soon after and potentially continue rising through the year's end.
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