AMD Initiated at Market Perform by William Blair on Balanced AI Outlook

William Blair initiated coverage of Advanced Micro Devices (AMD) with a Market Perform rating, arguing that the chipmaker's current valuation appropriately reflects both its strong growth prospects in artificial intelligence and significant competitive challenges.

AI Growth Potential

In a note published Thursday, analyst Sebastien Naji positioned AMD as a "major beneficiary of the AI infrastructure boom," driven by demand for advanced computing. William Blair projects that this tailwind could propel AMD's sales from an estimated $52 billion in 2026 to over $104 billion in 2028.

The firm also forecasts that AMD's non-GAAP earnings per share could approach $20 by 2028. This growth is expected to be fueled by the increasing complexity of AI models and the expansion of inference and agentic use cases.

Competitive Headwinds

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Despite the positive outlook on AI, William Blair cautioned that AMD faces an "uphill battle" against market leader Nvidia in the graphics processing unit (GPU) sector. The note stated that competition from Nvidia and the development of custom ASICs by large cloud providers will likely "constrain meaningful share gains" for AMD.

Furthermore, the firm believes the "era of easy CPU share gains is ending" for the company. It cited unprecedented competition from the Arm ecosystem, with hyperscalers, Nvidia, and Qualcomm developing their own CPUs. The note also mentioned that rival Intel is "starting to show signs of improvement," though it may take two years for it to compete effectively again.

Valuation Reflects Risks

William Blair noted that AMD's stock trades at 33 times its 2027 earnings estimate, which represents a slight premium compared to its peer group median. The firm concluded that this valuation fairly balances the strong demand for AI computing against risks such as intense competition, potential supply constraints, and a possible slowdown in the growth of AI spending.