Why is AMD stock gaining 2% today?

AMD stock rose 2.7% on Thursday after Bank of America raised its long-term outlook for the server CPU market, arguing that the rise of AI agents is expanding the role of central processing units in data centers.

The brokerage increased its estimate for the 2030 server CPU total addressable market (TAM) to more than $210 billion from around $170 billion, citing stronger AI compute demand and memory trends following second-quarter earnings across the semiconductor industry.

BofA said the revised forecast implies "nearly 5x growth off the ~$35bn CY25 level," with the market now expected to expand at a 36% compound annual growth rate through 2030, up from its previous estimate of 30%.

BofA sees AI agents reshaping CPU demand

According to analyst Vivek Arya, the emergence of agentic AI is changing the relationship between CPUs and GPUs inside data centers.

The brokerage said the CPU-to-GPU ratio is shifting from roughly 1:4 during the AI training phase toward approximately 1:1 for agentic AI, "as CPUs become the orchestration control plane."

As a result, BofA now expects CPUs to account for about 10% of the overall $2.2 trillion data center systems market by 2030, compared with roughly 7% during the AI training era.

The firm said the key industry debate is whether CPUs will replace other compute components or expand the overall market opportunity.

BofA argued CPUs are "additive to overall system TAM," pointing to near-record GPU rental rates and elevated memory spot prices as evidence that shortages extend across the broader AI infrastructure ecosystem.

Among chipmakers, AMD remains BofA's preferred CPU investment because of what it described as the company's "dual leadership" in processor frequency and core count.

Nvidia remains the firm's top overall semiconductor pick, while Intel's foundry business offers additional optionality and Arm continues to gain market share rapidly.

Morningstar keeps fair value unchanged

Morningstar maintained its $530 fair value estimate on AMD despite the stock's strong rally over the past year.

Dave Sekera, CFA, chief US market strategist at Morningstar, said in Morning Filter podcast that AMD continued to outperform expectations during the second quarter, noting that revenue rose 50% year over year while server CPU revenue increased 75%.

"It's really all about their server CPUs," Sekera said. "There is a shortage with the AI buildout boom. People need those CPUs in order to be able to manage all those AI workloads."

Looking ahead, he said Morningstar expects AMD to begin shipping its Helios AI rack solution in the fourth quarter. The research firm also forecasts server CPU revenue growth of about 70% in 2027, while its data center business could expand by more than 100%.

Sekera cautioned against reading too much into short-term share price movements, adding, "I wouldn't read too much into the movement in any one particular day. I mean, overall, that stock is still up year to date, 125%."

AMD stock had fallen 7% after reporting its earnings as investors were disappointed with the company's margins.

Morningstar investment specialist Susan Dziubinski noted that AMD has appreciated significantly since the firm first highlighted it in early 2025.

Although the stock recently pulled back, she said it now trades modestly below Morningstar's fair value estimate.

"At this point, I would say, for lack of a better way of putting it, it's a hold," Dziubinski said, adding that Morningstar expects investors to generate returns broadly in line with the company's long-term cost of equity rather than the outsized gains seen over the past year.