Advanced Micro Devices, Inc. (NASDAQ:AMD) is trading at roughly 70x forward earnings, but Phillip Securities believes this premium is justified given its positioning for rising agentic AI demand. On August 11, the firm's analyst Yik Ban Chong reiterated a Buy rating on the stock with a $755.00 price target. According to the firm, AMD's client and gaming business faces softer demand due to higher memory costs, but rising MI450 and Venice demand support the longer-term buy thesis.
Despite an expected cyclical downturn in the client and gaming business, Phillip Securities has raised its FY27e revenue and PATMI assumptions by 4% each. This is supported by increasing visibility across Helios, MI450GPU, and Venice server CPU demand. A major part of the bull thesis rests on Anthropic.
On July 22nd, the company announced that it will be partnering with AMD to deploy up to 2 gigawatts of AMD Instinct MI450 Series GPUs in AMD Helios rack-scale solutions, with deployment of the first gigawatt to begin in the first half of 2027. As per the firm's estimates, this could bring in an additional US $30 billion in revenue, equivalent to 87% of FY25 revenue. Not only this, Wedbush has recently highlighted that AMD's Anthropic partnership could translate into substantial real-world AI infrastructure demand.
The firm noted how Anthropic's reported 191-megawatt data center agreement with Riot Platforms (NASDAQ:RIOT) offers a sign of durable AI spending, potentially benefitting AMD as it prepares to supply Anthropic with its next-generation AI accelerators. Trading at roughly 69.9x FY26e P/E, the premium valuation is a reflection of AMD's improving position in the next phase of AI infrastructure spending. The bear case for AMD is that its expected AI expansion is already reflected in its valuation.
Sitting well above the tech sector average, its valuation signifies aggressive future growth expectations for AI and data center chips. Estimates from Phillip Securities also highlights some of the near-term pressure. In particular, the firm lowered its FY26e PATMI forecast by 8% due to softer demand in client and gaming.
This is a sign that strength seen in artificial intelligence for AMD doesn't insulate it from weakness in other parts of its portfolio. More importantly, the bullish thesis for AMD rests on strength across Helios, MI450GPU, and Venice server CPU demand. If this demand weakens, AMD's premium valuation may be harder to defend.
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