Advanced Micro Devices Stock Forecast: AMD rally stuck in $120-$130 resistance thicket

Advanced Micro Devices (AMD) stock advanced 5.3% on Tuesday on the back of an analyst upgrade that gave the semiconductor designer a $150 price target. AMD stock has added another 0.3% in the premarket on Wednesday to $124.60, while NASDAQ futures are tracking down 0.2%.

AMD stock news: After Nvidia, AMD is the #2 AI chip stock

On Tuesday, Piper Sandler analyst Harsh Kumar bumped up his price target on AMD stock from $110 to $150. The longtime bullish analyst cited growing chip demand and AMD’s business relationship with Microsoft (MSFT), which owns a large chunk of ChatGPT-maker OpenAI. Piper Sandler retains its Overweight rating on AMD stock as well.

Kumar’s update comes just a day after Citigroup analyst Christopher Danely reiterated a neutral rating on AMD stock but raised the firm’s price target from $85 to $120. This demonstrates that even a less bullish analyst thinks AMD has earned its current valuation.

At the end of May, Bank of America Securities’ Vivek Arya raised his price target from $120 to $135. This was actually the third time in the month that he upgraded the AMD price target. First, he raised it from $95 to $105 on May 10. Then he raised it on May 23 from $105 to $120. It seems Mr. Vivek is following the price action as AMD stock did rocket more than 32% in May. 

AMD stock has advanced 94% so far this year. Although this does not compare with Nvidia (NVDA), which is up 170% year to date, AMD’s advanced chip technology is viewed as the runner-up to Nvidia’s H100 GPU. During the recent AMD earnings call, CEO Lisa Su touted the high expectations for AMD’s soon-to-be introduced MI300 chip.

“MI300 is actually very well-positioned for both HPC or supercomputing workloads as well as for AI workloads,” Su said during the earnings call. “With recent interest in generative AI, I would say the pipeline for MI300 has expanded considerably here over the last few months.”

Bloomberg recently reported that AMD is advising Microsoft’s Silicon division, which endeavors to wean itself off of the highly-priced Nvidia AI chips used in its new Azure data centers. The report says the project for Microsoft to design its own chips is called “Athena”, though Microsoft spokespeople denied cooperation between the firms.

“With MI 300, that starts to ramp in Q4, and we see that with supercomputing and some new AI wins that we have,” said Dan McNamara, senior vice president and general manager of AMD's server business, at the Bank of America 2023 Global Technology Conference on Tuesday.
 

AMD stock forecast

AMD finds itself back within the $120 to $130 supply window. This is a region where just enough traders are willing to take profits that strong resistance is formed. AMD stock felt the weight of this range in both August and October of 2021 during its major breakout. Then again during 2022’s great sell-off, AMD shares formed two lower highs in this range during February and March. On May 30, just last week, AMD stock again slammed into the $130 level again before closing down near $125.

It makes sense that AMD stock would consolidate here before making a run at the $150 to $156 resistance window. AMD stock is already overbought according to the Relative Strength Index (RSI), and many bulls will want to see that indicator subside back to 50 before plowing back into the stock.

AMD daily chart