DA Davidson Upgrades AMD to Buy
DA Davidson analyst Gil Luria upgraded AMD (NASDAQ: AMD) from Neutral to Buy with a price target of $375.00 (from $220.00).
“We are upgrading shares of AMD to BUY from Neutral and raising our price target to $375 from $220 based on a structural increase in CPU demand on top of much improved visibility into AMD’s role in the great data center buildout.
We believe that given the magnitude of Intel’s beat, there is meaningful upside to AMD’s estimates, starting with the March quarter which AMD is due to report May 5th.
We figured CPUs were the next big bottleneck, but Intel’s results indicate that is already translating to very significant upside.
In recent months, it has been clear that the CPU is reinserting itself as an indispensable foundation of the AI era, and the once sleepy CPU market has taken off as agentic workloads shift compute needs beyond GPUs.
We point to Intel’s 1Q26 results as a key indicator of this demand with Intel CFO Zinsner noting the company’s expectation for the industry to grow double-digits with momentum expanding into 2027.
By Intel CEO Tan’s assessment the ratio of GPUs to CPUs will go from 8 to 1 for pretraining closer to parity for agentic workloads.
We view Intel’s results as a precursor for a huge step-up for AMD’s CPU franchise and believe the structural shift toward argentic AI workloads is creating unprecedented demand for server CPUs.
We believe AMD is favorably positioned to significantly raise prices across the portfolio to support and expand margins given our view that demand will outpace supply for the foreseeable future.
We are raising our 2026 estimates for AMD by $2bn of revenue and $1.5bn of gross profit, now materially above guidance and consensus.
Even though AMD has lower CPU share, if Intel can add ~$2.5bn a year of revenue and Gross Profit based on the tightness in CPUs, we are comfortable with those levels for AMD.
Beyond CPUs, we must acknowledge AMD’s long term guidance has become much more doable than it was just a few weeks ago.
We regret not underwriting AMD’s participation in the GPU buildout upon initiation, and the addition of Meta’s 6 gigawatts and (customer) OpenAI’s $122bn fundraise tip the scale in favor of endorsing the 35% CAGR trajectory.
Upgrading to BUY from Neutral and raising our price target to $375 from $220, based on 32x CY27 EPS.”
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