Advanced Micro Devices (AMD) "significantly outperformed in its traditional markets," including client central processing unit sales, server compute and gaming, which backed its Q1 results, Wedbush analysts said in a Wednesday research note.

AMD's business is "tracking better than expected," owing to its strength in these markets and a constructive outlook for the graphics processing units business, the brokerage said.

Strength in these traditional markets into Q2 allows the company to mitigate a roughly $700 million headwind from the loss of the China data center GPU market.

Wedbush said its only significant concern is whether the Administration would come up with "another tariff/policy curve ball."

"While management is naturally cautious, we would note the possibility that the administration opts for another self-inflicted economic wound (this time targeting semiconductors) and that the conservatism AMD typically bakes into forecasts isn't enough to account for the impact of new tariffs/policy," Wedbush said.

Even though the company is expecting "sharp sequential downtick" in Q2 data center GPU revenue due to the China factor, it remains upbeat on the second-half's GPU momentum, guiding flattish sales for Q3 and a resumption of growth in Q4 driven by MI350 product launch, the brokerage said.

These factors "should moderate investor fears that AMD may not participate in future AI market growth (or participate enough to drive the future model)," Wedbush said.

Wedbush maintained its outperform rating on the company, while raising the price target to $120 from $115.

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