UBS: AMD Server CPU Unit-Driven Upside Adds Durability; Maintain Buy
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UBS maintains a Buy rating on Advanced Micro Devices (AMD.US), arguing that the company's server CPU growth is primarily driven by unit shipments rather than average selling price increases, enhancing the durability of its upward trajectory. AMD's server CPU market share is expected to exceed 30% by 2026, up from 25% in 2024. Data center revenue is projected to grow 50% year-over-year in 2025 to reach $12 billion, with server CPUs contributing approximately 60%. Although demand for the MI300 series AI accelerators remains strong, supply constraints limit near-term upside, making the cyclical recovery and unit growth in server CPUs a more sustainable engine. The client PC segment is forecast to grow 15% in 2025, supported by the Windows 11 refresh cycle. Meanwhile, the embedded business is expected to decline 10% in 2025 before returning to growth in 2026. UBS maintains a $200 target price, based on 30 times 2026 expected earnings per share. Looking forward, data center revenue is projected to reach $14.4 billion in 2026, while MI300 revenue could scale to $6 billion. Key downside risks include a potential slowdown in AI spending, intensifying competitive pressures, and broader macroeconomic uncertainty.
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