AMD or Super Micro Computer: Analysts decide to buy the superior AI stock before earnings

AI is today’s “shiny new thing,” the technological advancement that will forever change the world we live in. Imagine the advent of metal smelting or the invention of the electric telegraph – AI is having a similar impact on our lives, an impact that is compounded by our dependence on technology of all kinds, especially digital technology.

The main advantage of AI is its potential to increase productivity. Programmers can already use AI for a variety of automated tasks, and companies are using AI to get more output with less input. Artificial intelligence frees up human intelligence and allows us to focus on the things we think are really important.

AI also creates numerous opportunities in the stock markets, as companies involved in the development and expansion of AI technology benefit from higher profits and increased investment activity. These AI stocks are shaping the financial future, and Wall Street analysts are taking note.

Two companies – Advanced Micro Devices (NASDAQ:AMD) and Super Micro Computer (NASDAQ:SMCI), both well-known names in AI technology – have attracted a lot of interest recently as they prepare to release financial and earnings results prepare. We opened up the TipRanks database to get an overview of both and find out which stock analysts have marked as the superior AI stock to buy ahead of the earnings release. Let's dive in.

Advanced Micro Devices (AMD)

We'll start with AMD, one of the semiconductor industry's leading innovators. Although AMD is not quite in the same league as market leader Nvidia, AMD is still the sixth largest chipmaker in the world with a market capitalization of $265 billion, and the company is pursuing a plan to expand its market share in the lucrative, i.e. large, segment is growing – market for AI-capable semiconductor chips.

AMD recently unveiled a number of new products, including cutting-edge PC processors and AI-enabled accelerators. The Ryzen AI PRO 300 Series is a line of AI-enabled mobile processors designed for the PC market to bring AI performance to business applications; The Instinct MI325X accelerators lead a range of new accelerator chips designed specifically for the generative AI and data center markets. and the EPYC CPUs are 5th generation processors designed for AI, cloud and enterprise applications. The common denominator here is a judicial push into the forefront of the AI ​​market, a corporate strategy to increase market share by offering essential quality.

AMD doesn't offer these chip lines in a vacuum. The company builds on its successful MI300 accelerator series and already has strong relationships with big AI names such as Meta, Oracle and Microsoft. The AI ​​chip market is growing rapidly and is expected to reach total global sales of up to $92 billion by the end of next year. AMD wants to ensure that the company can get a bigger piece of the pie than before.

The chipmaker is expected to release its earnings results today, October 29, after the market closes. The Street expects revenue of around $6.7 billion paired with EPS of 92 cents for the 3Q24 release. By comparison, the company reported second-quarter revenue of $5.84 billion and earned 69 cents per share, beating forecasts by $113.8 million, or 1 cent.

For Stifel analyst Ruben Roy, AMD's earnings outlook is reasonable and investors should find plenty of reasons to believe AMD will continue to grow in the future.

“We expect September quarter revenue to be slightly above the forecast midpoint of $6.7 billion (+15.5% YoY, +14.8% QoQ), reflecting The continued momentum in the data center segment, for which we forecast a 20% increase compared to the previous quarter /Q. We also expect the outlook for the December quarter to be positive and MI300 revenue expectations for the full year to be raised again. We continue to believe that AMD is positioned to benefit from various medium-term growth drivers, including (i) investments in AI infrastructure, (ii) further market share gains in x86 CPUs, and (iii) an AI-driven PC Update cycle, what we expect “We will accelerate in 2025,” said Roy.

To that end, the analyst rates AMD shares a Buy and his $200 price target implies a 22% upside in the coming months. (To view Roy's track record, click here)

This outlook is consistent with the Street's bullish view. AMD stock has a Strong Buy consensus rating based on 31 recent analyst reviews, which include 25 Buys and 6 Holds. The stock is priced at $163.87 and the average price target of $188.54 suggests a one-year upside potential of nearly 15%. (See AMD stock forecast)

Super microcomputer

The next stock reviewed is SMCI, a leading provider of high-quality, AI-enabled computer hardware. The company designs, develops and manufactures advanced computing systems essential for running AI applications. These include enterprise-scale server stacks, high-performance computers, and solid-state storage systems that form the backbone of the hardware infrastructure critical to AI. Additionally, these systems support a range of advanced data center applications such as cloud computing, edge computing and even 5G networks.

Super Micro Computer has been in the business of developing world-class computer systems since 1993, during which time it has become the industry's “one-stop shop” for customized high-end computing needs. Super Micro's main claim is that the company can design and build its products – server stacks and HPCs – to any specification, no matter how unique or demanding. The company has in-house design and manufacturing capabilities and fulfills orders with a combination of bespoke equipment and standard parts – and can fulfill these orders at any scale and for a wide range of applications.

The company backs up this guarantee of order fulfillment with a robust manufacturing footprint, over 6 million square feet of manufacturing space and global offices in over 100 countries. Super Micro can maintain high production output and complete up to 5,000 AI systems, HPCs and liquid cooling racks every month. The company currently ships more than 100,000 GPUs per quarter.

Although Super Micro has benefited greatly from the AI ​​boom in recent years, we should note that the stock peaked in March of this year and has fallen since then. Some of the recent headwinds that have hit the stock have come from government regulators – the Justice Department is investigating possible accounting violations and the investigation resulted in the company falling out of compliance with NASDAQ's rules for regulatory filings. Despite these bureaucratic and legal problems, Super Micro was able to carry out a planned 10:1 stock split last October 1st.

On the financial side, Super Micro's performance was solid. Sales rose from $7.2 billion in fiscal 2023 to $14.94 billion in fiscal 2024. For the first quarter of fiscal 2025, analysts expect sales of $6.46 billion, indicating continued growth indicates strong growth dynamics.

While the company is an established name in the AI ​​world and has a solid niche, Barclays analyst George Wang sees a number of challenges in the short and medium term.

“Our more cautious view [is] This is mainly due to lack of visibility of future AI server GM trends, continued customer attrition (i.e. loss of market share), weaker competitive positioning in the GB200 era (declining market share) with higher working capital requirements and room for improvement in terms of internal controls and corporate governance . We would like to see more transparency in financial reporting regarding quarterly order intake and order backlog. While we remain positive about the long-term prospects related to AI, we believe the current risk-reward trade-off for SMCI is balanced,” Wang explained.

Following this stance, Wang gave SMCI shares an Equal Weight (i.e. Neutral) rating, with a $42 price target suggesting a one-year share value loss of 14.5%. (To view Wang's track record, click here)

Wang's caution is shared by many analysts: Of 12 analysts covering SMCI, three recommend buying, while nine recommend holding the stock. Nonetheless, the stock's consensus price target of $64.49 suggests a potential upside of 31% from current trading levels. However, this upward trend does not justify the risk in the eyes of analysts. (See SMCI stock forecast)

Given the data at hand, it seems clear that Wall Street analysts favor AMD over Super Micro Computer as a superior AI stock to buy ahead of the companies' upcoming earnings releases.

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.