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The AMD Report

Welcome to a special edition newsletter focused on Advanced Micro Devices (AMD), a leading player in the semiconductor industry, which has seen significant recent developments, particularly in the booming Artificial Intelligence (AI) sector.

Fundamental Analysis

AMD is viewed by some investment models, such as the Contrarian Investor model, as a large-cap growth stock in the Semiconductors industry. Fundamentally, the company demonstrates strengths in its earnings trend and future EPS growth rate being favorable, along with passing criteria for the current ratio and pre-tax profit margins.

However, the company shows weaknesses in conventional valuation metrics. Its Price-to-Earnings (P/E) ratio is quite high (over 100), reflecting the market's expectation of strong future growth, which is common for high-growth tech stocks. Other unfavorable metrics include its Price/Cash Flow (P/CF), Price/Book (P/B), and Return on Equity (ROE) ratios, suggesting the stock may be richly valued based on current, trailing financials. The company's business is diversified across segments including Computing & Graphics and Enterprise, Embedded, and Semi-Custom. The recent focus is on the Data Center segment, fueled by the demand for AI accelerators.

Technical Analysis

Technically, AMD has shown a moderately bullish tone recently, with significant price surges following major news. Various technical ratings, including those based on Moving Averages, have indicated a "Strong Buy" signal, reflecting the upward momentum.

However, oscillators provide a more mixed, "Neutral" overall rating. Historically, the stock has been trading within a large, simple rising channel formation, with recent price action confirming the bullish trend after retesting a major support area. The stock has experienced a massive surge, especially recently, touching its all-time high.

Big News

1. Massive AI Chip Deal with OpenAI: AMD announced a multi-year, multi-gigawatt strategic partnership with OpenAI to supply its next-generation AMD Instinct GPUs for OpenAI's AI infrastructure buildout. This deal, starting with a 1 gigawatt deployment of MI450 GPUs in late 2026, is a massive win, allowing OpenAI to diversify its chip supply away from competitors.

2. Stock Surge on OpenAI News: Following the OpenAI announcement, AMD's stock experienced a significant surge, climbing over 30% in pre-market and early-day trading, reaching new highs and generating strong volume. The market reacted strongly to the potential for tens of billions of dollars in new revenue over the next five years.

3. Warrant Agreement with OpenAI: As part of the strategic agreement, AMD will issue OpenAI a warrant for up to 160 million shares of AMD common stock. The vesting of these shares is contingent upon achieving specific milestones, including the scale of GPU purchases and AMD reaching certain share-price targets.

4. Expanded AI Collaboration with Cohere: In a separate, but related, development, AMD expanded its global AI collaboration with Cohere to further power enterprise and sovereign deployments using AMD AI infrastructure. This highlights AMD's broader strategy to build out its presence in the AI ecosystem beyond any single client.

Expert Recommendations and Forecast

Expert sentiment on AMD is highly positive, with a "Buy" consensus rating among analysts.

• Approximately 44% of covering analysts rate the stock a "Strong Buy," and 38% recommend a "Buy," indicating strong conviction in the company's future.

• The average one-year price target from a pool of analysts stands around $189.22 to $192.93.

• Forecasts vary, with the low price target around $140.00 and the high price target reaching up to $230.00. These targets largely pre-date the most recent, massive stock move following the OpenAI news, suggesting they may be revised upward as analysts incorporate the new revenue outlook.

Earnings and Outlook

• Next Estimated Earnings Date: AMD is currently estimated to report its next quarterly earnings on or around Tuesday, November 4, 2025, after the market closes. This date is for the fiscal Third Quarter (Q3) of 2025.

• Outlook: The company's overall outlook remains strong, driven primarily by the high demand for its Data Center GPUs which are essential for AI applications. The recent landmark deal with OpenAI solidifies AMD's position as a major contender in the AI chip space, a market previously dominated by competitors. While the Gaming and Embedded segments face mixed demand environments, the growth in Data Center and Client (PC) segments is projected to provide robust top-line growth, positioning AMD favorably for continued market share gains.