AI computing power demand continues to skyrocket, Citigroup hails AMD as the "king of the hill" outperforming NVIDIA Corporation and Broadcom Inc.

Despite a recent pullback in the global stock market's chip/semiconductor sector, the semiconductor analyst team at Wall Street financial giant Citigroup Group stated that, after discussions with senior engineers in the semiconductor industry and mainstream institutional investors, analysts and investors still hold a strong bullish attitude towards several chip companies closely related to AI computing infrastructure. Among them, NVIDIA Corporation's biggest competitor in the PC and data center chip field, AMD (AMD.US), was rated as the "most favored" stock and considered the "king of the hill" by Citigroup, surpassing the other two major AI chip giants - NVIDIA Corporation (NVDA.US) and Broadcom Inc. (AVGO.US). At AMD's analyst day event last week, AMD CEO Su Zifeng provided a very optimistic outlook for the AI computing chip market and predicted that AMD's performance will show a more robust growth trajectory in the next five years. Su Zifeng unveiled AMD's financial fundamentals for the next three to five years, stating that AMD's goal is to capture a "double-digit" share of the AI chip market in data centers, with AMD's data center chip revenue expected to reach $100 billion in five years (compared to the current $16 billion) and profits to more than double by 2030. Su Zifeng also predicted that by 2030, the total market size of AI data centers, including AI central processors, accelerators, and high-performance network products, will exceed $1 trillion, far surpassing this year's approximately $200 billion, with a compound annual growth rate (CAGR) exceeding 40%. For overall profit, Su Zifeng expects that in three to five years, the company's earnings per share (EPS) will increase to $20. The strongest buy momentum in the semiconductor stock market - AMD AMD is one of the only chip companies in the world that can compete in GPU-level computing power in the field of AI computing infrastructure, which is dominated by NVIDIA Corporation's AI GPU series products. Therefore, some top Wall Street investment institutions are very optimistic about AMD's continuous erosion of NVIDIA Corporation's market share, which is currently at the $100 billion level, and expect it to achieve a much faster growth rate than NVIDIA Corporation. After AMD reached a 6GW AI GPU computing power purchase agreement with OpenAI and an innovative "equity-AI computing power supply betting contract," the market's outlook for AMD's fundamentals and future valuation has become even more optimistic. The third-quarter results showed that AMD's overall revenue in the third quarter increased significantly by 36% year-on-year to $9.25 billion, higher than the Wall Street average expectation of $8.7 billion. Most of the contributions came from the data center business division - the business unit that provides NVIDIA Corporation's Blackwell AI GPU, the most powerful GPU computing power competitor, and high-performance CPUs for data centers. AMD's recent heavyweight long-term cooperation agreements with OpenAI, Oracle Corporation, and U.S. Energy Corp. reflect the market's greatly increased interest in its MI series AI GPU product line. These products compete fiercely with NVIDIA Corporation's Blackwell AI GPU and are used for AI large model training and running massive AI inference workloads. Unlike NVIDIA Corporation, AMD is also one of the largest suppliers of GPUs and high-performance central processing units (CPUs) for personal computers and data center servers. Last month, one of its major competitors, Intel Corporation (INTC.US), pointed out that the current AI frenzy is driving strong demand for new AI-enabled laptops and enterprise-level server CPUs in the market. In these key business areas other than data center AI GPUs, AMD has been competing with its longtime rival, Intel Corporation, for market share. In recent weeks, global prices of high-performance storage products in the DRAM and NAND series have continued to rise, coupled with the fact that the world's most valuable AI startup, OpenAI, has completed a transaction exceeding $1 trillion in AI computing infrastructure, and the "king of chip manufacturing," Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, storage giants Samsung and SK Hynix have announced extremely strong results surpassing expectations and raised revenue growth expectations for 2025 and 2026, significantly strengthening the "long-term bull market narrative" of the AI computing infrastructure sector, including AI GPUs, ASICs, HBM, data center SSD storage systems, liquid cooling systems, core power equipment, etc. "Considering the higher level of earnings per share (EPS) growth in the 2027 calendar year, AMD is currently the stock with the strongest buying momentum in the market. Our research feedback shows that this analyst day will help solidify its revenue/profit margin targets and EPS target of $20." The team led by Citigroup analyst Christopher Danely wrote in a client report, reiterating a target price of $260. Citigroup also emphasized that Broadcom Inc. (AVGO.US) is likely still one of the investors' "core AI heavy-holding stocks," but concerns about the lack of clarity regarding the upside potential brought by its commercial TPU and broader AI ASIC chip business have increased. However, analyst Danely added, "We expect a strong upward trend in Broadcom Inc.'s stock price after the release of its latest financial report next month." Although NVIDIA Corporation (NVDA.US) has been the leading stock in the AI computing infrastructure sector for the past two years, leading to exponential expansion in the index, the analyst team led by Danely stated that conversations with investors showed that, due to the expected trajectory of EPS growth leaning towards a "relatively slowing stage," NVIDIA Corporation has become less popular among investors compared to AMD or Broadcom Inc. Veteran giant Intel Corporation and "analog king" Analog Devices, Inc. poised for growth Regarding investor sentiment towards the U.S. veteran chip giant Intel Corporation (INTC.US), investors seem to have become more bullish due to positive speculation about its foundry business and strong expectations for improvement in its server CPU business. "While we agree that its traditional data center server CPU business is significantly improving, we still do not see a path to profitability in the foundry business," Danely added. When Intel Corporation management announced their results in October, they stated that the market's supply of their chips will continue to be in short supply until next year, mainly due to the unprecedented surge in demand for high-performance servers CPUs in data centers and strong demand for AIPC powered by Intel Corporation PC chips. Danely also pointed out that investors have begun to rethink the idea that market leaders in storage chips like Micron Technology, Inc. (MU.US) and semiconductor equipment manufacturers will remain in a long-term bull market state. There are concerns that Micron Technology, Inc.'s overall fundamentals may find it difficult to return to peak profit margins in 2017, and in recent weeks new worries have emerged - that global fab equipment spending may exceed $120 billion, indicating lower growth than the market consensus. Finally, in the extremely broad global semiconductor business, investors still hold a pessimistic attitude towards the analog chip sector, which has been slow to destock and has suffered from sustained low demand since 2022. However, Citigroup stated that Analog Devices, Inc. semiconductor (ADI.US) is the only exception. "We recognize that the analog chip sector will likely remain 'stagnant' until the end of this year, but considering that inventory remains low and profit margins are under pressure, we still have confidence in a strong recovery at some point in the future," analyst Danely added. "It is clear that the analog chip sector as a whole is 'sluggish,' and Analog Devices, Inc. is almost the only analog chip target that investors are still holding. Texas Instruments Incorporated (TXN.US) seems to be the primary target for short selling in this sector, as the market generally believes that its EPS expectations will continue to be revised downwards." Analog Devices, Inc. (Analog Devices, Inc.), often abbreviated as ADI, is a global leader in analog chip companies headquartered in the United States and is considered the "barometer of analog chips." The company focuses on the development and manufacturing of high-performance analog, mixed-signal, and digital signal processing technologies. Analog Devices, Inc.'s semiconductor products are widely used in electric vehicles, aerospace, industrial automation, and consumer electronics, with major customers including Boeing Company and Siemens.