AMD Stock: Why This Analyst Remains Skeptical of AI Strategy

TLDR

• AMD stock declined 12% despite beating Q4 expectations with $5.4 billion data center revenue, up 39% year-over-year
• New Helios rack-scale platform and MI450 chips launching Q3 2026 with OpenAI securing 6 gigawatts of GPU capacity
• Epyc CPUs hit record sales as AI infrastructure demand grows, with Venice processors coming H2 2026
• D.A. Davidson analyst Gil Luria assigns Neutral rating citing interconnect limitations and software ecosystem gaps versus Nvidia
• Wall Street consensus remains Moderate Buy with $286.80 average target implying 38% upside potential

Advanced Micro Devices stock dropped 12% following its February 3 earnings release despite posting solid fourth-quarter 2025 numbers. The disconnect between results and market reaction highlights investor concerns about the company’s ability to capture meaningful AI market share.

Advanced Micro Devices, Inc., AMD

Data center revenue reached $5.4 billion in Q4, representing 39% growth from the prior year. Instinct MI350 Series GPUs and Epyc CPU deployments drove the increase, with eight of the top ten AI companies now using AMD’s Instinct accelerators.

The company is pivoting from selling individual chips to complete infrastructure solutions. Its Helios rack-scale platform combines CPUs, GPUs, networking hardware, and software into turnkey AI systems centered on MI450 accelerators.

MI450 Launch and OpenAI Partnership

AMD expects MI450 revenue to start in the third quarter of 2026 with volume ramping in Q4. The majority of shipments will be full Helios systems rather than standalone chips.

OpenAI has committed to a multi-year, multi-generation partnership deploying up to 6 gigawatts of Instinct GPUs beginning with MI450 in the second half of 2026. Management indicated other customers are in discussions for similar large-scale commitments.

The Epyc CPU business achieved record quarterly sales powered by fifth-generation Turin and fourth-generation Genoa processors. Despite typical first-quarter seasonality, management projects sequential CPU revenue growth into Q1 2026.

CPUs are handling more AI workload responsibilities including orchestration, memory management, and data preprocessing. Cloud providers and enterprises are building out infrastructure to support AI applications, creating sustained Epyc demand.

Analyst Raises Performance Concerns

D.A. Davidson’s Gil Luria initiated coverage with a Neutral rating and $220 price target, expressing skepticism about AMD’s competitive position. Luria acknowledged strong single-node GPU specifications but questioned performance at scale across tens of thousands of chips.

The analyst suggested OpenAI ranks AMD behind Nvidia and potentially behind Broadcom ASICs and other alternatives. This positioning reflects real-world deployment challenges beyond paper specifications.

ROCm software platform improvements continue but face steep competition from Nvidia’s CUDA ecosystem. CUDA enjoys nearly two decades of developer tools, libraries, and familiarity that make it the default choice for AI development.

Luria identified a concerning dynamic where lower Instinct volumes result in reduced TSMC manufacturing priority compared to Nvidia, Apple, and hyperscaler programs. This creates supply uncertainty for buyers and limits ROCm development feedback, creating what the analyst calls a “negative flywheel.”

Wall Street Divided on Outlook

The broader analyst community maintains a more optimistic stance with 24 Buy ratings against 8 Hold ratings. The Moderate Buy consensus carries an average price target of $286.80, suggesting 38% upside from current levels.

AMD shares closed at $207.19 on February 13, 2026. The company holds a market capitalization of $338 billion.

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