MW Here's why HSBC analysts are giving up their bearish call on AMD's stock

By Britney Nguyen

Saudi Arabia's $600 billion U.S. investment commitment is one factor that could drive upside in 2026, though the outlook for this year is less clear

Analysts at HSBC Global Research upgraded Advanced Micro Devices Inc.'s stock to a hold rating on Tuesday, citing potential for future upside thanks to a new deal between the U.S. and Saudi Arabia, as well as the company's upcoming artificial-intelligence chips.

Earlier this month, the Trump administration announced a $600 billion investment commitment by Saudi Arabia across several industries in the U.S., including technology and defense. Although the analysts called the deal "appealing in terms of long-term TAM (total addressable market) opportunity," they said any potential upside for 2025 is currently unclear.

At the same time, AMD $(AMD)$ announced a $10 billion partnership with Saudi AI firm Humain to deploy up to 500 megawatts of AI compute power over the next five years. HSBC reiterated that "it's too early to quantify the timing of revenue generation as well as potential upside" from the deal.

Analysts at Rosenblatt Securities previously called the deal a "positive" for AMD, and said it should help the company and rival Nvidia Corp. $(NVDA)$, which also has a deal with Humain, to "partially offset the impact from the recent U.S. export restrictions to China." AMD previously said it expects U.S. export restrictions on its MI308 chips to lead to a revenue loss of $1.5 billion for 2025.

See more: Nvidia, AMD extend stock gains. Why the AI trade is roaring back.

"Nevertheless, we do recognise that the tariff de-escalation and the potential of the Saudi AI deal has already led to a rerating of AMD shares, despite a limited or quantifiable earnings impact," the HSBC analysts said as they ditched their prior "reduce" call on the stock.

Since the U.S. and China agreed to pause reciprocal tariffs for a 90-day period on May 12, HSBC noted that the chip maker's stock has climbed 7%, and that its price-to-earnings ratio for the full year had improved to 29x. HSBC raised its target P/E ratio to 26x, from 20x, as a result.

The analysts boosted their 2026 revenue estimates for AMD's graphics processing units from $6.6 billion to $7.8 billion on their "expectation of around a 15% increase in CoWoS (chip on wafer on substrate) allocation" for the company, which would benefit its Instinct MI350 chip series. That "should come with a pricing premium and help improve the product mix," the analysts said.

AMD is also expected to release its Instinct MI400 series next year, but the analysts noted it's "too early to quantify the revenue potential" there.

"Hence, our 2025/2026 data-center revenue estimates remain 5%/6% lower than consensus estimates," HSBC said.

Meanwhile, the analysts added that they are "more optimistic" about AMD's client segment, as the company "is in a good position to fend off competition from Intel" and gain market share. HSBC had initially expected Intel Corp. $(INTC)$ to add pricing pressure on AMD in an attempt to regain market share. The strategy ended up having no material impact, the analysts said, as AMD already has competitive pricing and advanced central processing units to make its product lineup more attractive.

The second half of the year "could be subseasonal," HSBC said, due to a strong first quarter. Therefore, the analysts are setting expectations for client revenue to be flat between both halves of 2025.

See more: AMD's stock is worth a fresh look, Bank of America says

Last week, analysts at Bank of America said AMD has "sufficient room" in the market for AI accelerators, despite expectations for Nvidia and custom chips to dominate. Vivek Arya, a research analyst at BofA, said AMD could see "a credible 3%-4% share" of the market for hardware that optimizes the speed of AI applications.

"Many customers have significant internal workloads and compute requirements for internal teams where AMD can play an important role," Arya said. "Its recent acquisitions across rack-scale systems and improving software position it well."

AMD unveiled its Radeon AI Pro R9700 GPUs and Threadripper 9000 series of processors along with other chips at Computex 2025 last week. The GPU is designed to speed up local AI inferencing, model fine-tuning and other AI workloads, the company said.

Shares of AMD were up 4.4% during afternoon trading on Tuesday.

-Britney Nguyen

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May 27, 2025 13:48 ET (17:48 GMT)

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