AMD stock forecast: why this Nvidia rival is on the cusp of a breakout

AMD stock has pulled back over the past few months, falling from a high of $584.90 in June to around $456 currently. During this correction, the stock has gradually formed a bullish flag pattern, suggesting the potential for further upside in the coming months. This outlook is also broadly in line with analysts’ expectations.

AMD stock technicals point to more gains

The daily chart shows that the Advanced Micro Devices stock has remained in a strong downward trend in the past few months. It has formed a descending channel and dropped below the 23.6% Fibonacci Retracement level. 

The stock has also moved below the 50-day Exponential Moving Average (EMA), while the Percentage Price Oscillator (PPO) has remained below the zero line since June 30th. In theory, these technicals suggest that it has more downside to go in the near term. 

On the other hand, the ongoing descending channel occurred after a strong surge, a sign that it is now forming a bullish flag pattern, a common continuation sign in technical analysis. 

This pattern often leads to more gains over time, with the next key target to watch being at $584.90, its highest point this year. A surge above that level will point to more gains, potentially to $600.

AMD stock chart | Source: TradingView

Advanced Micro Devices has major catalysts 

AMD has several bullish catalysts that may boost its performance in the coming months. The most important one is that there are signs that the AI industry is seeing strong growth, and there are no signs of slowing down. 

Just this week, companies like Dell Technologies and HP Enterprise released strong numbers and boosted their outlooks. Dell’s revenues jumped by 58% in the last quarter to $47 billion, while HP Enterprise’s revenue soared to $12.2 billion from $9.1 billion in the same period last year.

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Most notably, all of AMD’s biggest customers in the AI industry, like Meta Platforms, OpenAI, Microsoft, Oracle, and Anthropic, have signaled that they will continue spending.

Most importantly, AMD has a large market share in the GPU and CPU industries, which are benefiting from the AI boom. Its CPUs are popular amid the ongoing growth of AI agents.

The most recent results showed that AMD’s revenue jumped by 50% in the second quarter to $11.5 billion. Its gross margin jumped to 54% from 40% in the same period last year. This margin growth happened as the data center boom pushed prices higher. 

AMD’s data center revenue rose by 107% to $6.7 billion, while its embedded one rose by nearly 20%. Its client and gaming revenue rose by 6% to $3.8 billion. 

Analysts remain optimistic that AMD’s revenue growth will continue in the coming years. For this year, the estimate is that its revenue will come in at $50 billion, followed by $87.39 billion next year. 

This growth explains why analysts are bullish on the stock. Raymond James’ Simon Leopold hiked his target from $565 to $641, with his rating being a strong buy. 

BMO Capital Markets’ Harsh Kumar initiated his rating to outperform with the target of $550. Other top analysts with a bullish outlook are from Rosenblatt Securities, DA Davidson, TD Cowen, and Wells Fargo. 

Still, the company remains highly overvalued, with the forward price-to-earnings ratio being 60, much higher than other companies.