Not just the CPU! Citibank upgraded AMD's rating to "buy" and praised the formal rise of GPU as the second growth pole.

Thanks to the high market attention to CPUs, chip giant AMD (AMD.US) has shown a strong performance in its stock price this year. However, according to Citigroup analysts, investors should not overlook its potential in GPUs. In a recent research report, the bank upgraded AMD's stock rating from "neutral" to "buy" and raised the target price significantly from $460 to $575. So far this year, AMD's stock price has more than doubled, driven mainly by demand for its AI-optimized CPUs. However, Citigroup analyst Atif Malik's optimistic outlook is more based on AMD's GPU sales prospects - especially as the company competes head-on with market leader NVIDIA Corporation (NVDA.US). Malik bluntly stated in the report that the current market's valuation logic for AMD is a misunderstanding. Most investors still see AMD as a CPU concept stock, and the current stock price only implies a 60% probability of AMD achieving over $50 billion in GPU revenue by 2028. In his view, this severely underestimates the wave that AMD is about to ride in the GPU market. Meta's hundred billion dollar order: Custom chips set to drive substantial volume The most core catalyst for Citigroup's significant rating upgrade comes from AMD's strategic cooperation agreement with social media giant Meta Platforms (META.US). According to disclosed information, the two parties have signed a multi-year supply agreement for AI data center GPUs with a computing power scale of 6 gigawatts, accompanied by 160 million common stock warrants. The initial delivery of 1 gigawatt is scheduled to start in the second half of 2026 and continue into 2027. Citigroup expects that each gigawatt of supply corresponds to approximately $15 billion of revenue for AMD. This means that with Meta alone as a customer, AMD is poised to contribute nearly $90 billion in potential revenue volume under this cooperation framework. Malik judged in the report that with the cost advantage provided by the custom MI450 chip developed in collaboration with Meta, AMD is likely to capture the "largest share" in Meta's future GPU purchases. "We now believe that AMD is becoming a truly reliable second choice in the GPU market and is likely to win the vast majority of market share with Meta," Malik wrote. Based on the aforementioned collaboration and broader market expansion expectations, Citigroup has significantly raised AMD's financial forecast for the AI business, expecting it to reach $33 billion in 2027 (a 137% increase year-on-year) and $50.8 billion in 2028 (a 54% increase year-on-year). CPU side still maintains strong firepower It is worth noting that analysts are not only bullish on AMD's bet on the GPU track, but its CPU business fundamentals also continue to attract Wall Street's favor. After the Taipei International Computer Show (Computex), Malik raised his model's prediction of the total potential market size (TAM) for CPUs in 2030 from $132 billion to $137 billion. He still believes that AMD will continue to be a "key beneficiary of the CPU renaissance wave", with advantages including leading performance, increased core count, x86 instruction set architecture, a more diverse SKU product line, and comprehensive capabilities in multi-threading and single-threaded workloads. When comparing AMD's upcoming Venice CPU with competitors NVIDIA Corporation (Vera) and Intel Corporation (Diamond Rapids), Malik believes AMD's product has the upper hand. He expects the Venice series to cover roughly 8 to 256 cores, support "a variety of workloads", maintain leading performance, and meet diverse computing needs. On the day before Citigroup's upgrade of AMD, Bank of America Corp had already raised AMD's target price from $500 to $560 and listed AMD as a preferred stock in the CPU field. Bank of America Corp analyst Vivek Arya raised the TAM estimate for server CPUs in 2030 from its previous $125 billion to $170 billion and believes that AI for smart bodies will be a strong catalyst for demand in this sector.