AMD shares gain as Wells Fargo boosts target, citing AI-driven CPU demand

Wells Fargo has increased its price target on Advanced Micro Devices to $615 from $505 while maintaining its Overweight rating, reflecting growing confidence in the company's long-term server CPU business and continued demand driven by artificial intelligence (AI).

AMD shares rose 2% on Tuesday's trading after closing the previous session 3.4% higher at $539.49.

Wells Fargo raises revenue and earnings forecasts

Wells Fargo increased its revenue estimates for AMD's server CPU business over the next three years.

The brokerage now projects server CPU revenue of $16.0 billion in 2026, rising to $20.5 billion in 2027 and $25.0 billion in 2028.

The firm left its data centre GPU revenue estimates unchanged at $15.6 billion for 2026, $40.6 billion for 2027 and $63.0 billion for 2028.

The brokerage also raised its earnings outlook, forecasting earnings per share of $7.15 in 2026, $13.40 in 2027 and $18.75 in 2028.

Wells Fargo based its new price target on a price-to-earnings multiple of 33 times its projected 2028 earnings.

AMD currently trades at a price-to-earnings ratio of 179.

AI demand continues to support the outlook

A Wells Fargo analyst team led by Aaron Rakers said the higher price target reflects expectations that demand for server central processing units will remain strong due to continued momentum in agentic AI.

The firm expects AMD's server CPU revenue to increase 68% in 2026.

It also forecasts server CPU sales growth of between 22% and 28% during 2027 and 2028.

Based on Monday's closing price, the revised target implies approximately 14% upside for the stock.

AMD highlights server CPU roadmap

AMD recently said production of its sixth-generation 2nm EPYC Venice server processors began ramping in late May, with volume production expected to continue through the second half of 2026.

The company said more customers are validating and ramping the Venice platform than any previous EPYC generation.

AMD also raised its estimate for the server CPU total addressable market to $120 billion by 2030 during the previous quarter.

The company added that its next-generation 2nm EPYC Verano processors are expected to launch in 2027, with a focus on delivering AI performance per dollar and per watt.

Recent AI-focused expansion

AMD also announced its acquisition of MEXT, a company specialising in AI-driven memory optimisation technology.

The acquisition is intended to strengthen AMD's AI portfolio by improving performance and lowering the total cost of ownership for customers operating in cloud and enterprise environments where memory constraints are a challenge.

Separately, AMD participated in the Series B funding round for cloud computing startup TensorWave, which closed at a valuation of $1.55 billion.

The investment supports TensorWave's plans to expand its infrastructure using AMD hardware and software and further strengthens AMD's position in the data centre ecosystem.

Other analysts also turn more positive

Several brokerages have recently revised their outlook on AMD.

Cantor Fitzgerald raised its price target to $700 while maintaining an Overweight rating, citing continued momentum in the compute market.

UBS increased its target price to $670, pointing to gains in AMD's server CPU market share.

Meanwhile, Wolfe Research reiterated its Outperform rating with a $450 price target, highlighting AMD's progress in artificial intelligence and graphics processing units.