Not just CPUs! Citi upgrades AMD rating to "Buy," hailing the official rise of GPUs as the second growth engine

According to Zhitong Finance, thanks to the high level of market attention on CPUs, chip giant AMD (AMD.US) has seen strong stock performance this year. However, Citi analysts believe investors should not overlook its potential in GPUs.

In a recently published research report, Citi upgraded AMD’s stock rating from “Neutral” to “Buy,” and significantly raised the target price from $460 to $575.

So far this year, AMD’s stock price has more than doubled, mainly driven by demand for CPUs optimized for Artificial Intelligence (AI). However, Citi analyst Atif Malik’s optimistic outlook is based more on AMD’s GPU sales prospects—especially as the company is directly competing with the market leader Nvidia (NVDA.US).

In the report, Malik stated bluntly that the current market has a misjudgment regarding AMD’s valuation logic. Most investors still regard AMD as a CPU concept stock, and the current price only implies about a 60% probability that AMD will exceed $50 billion in GPU revenue by 2028. In his view, this severely underestimates the wave that AMD is about to cause in the GPU market.

Meta’s Tens of Billions of Dollars Order: Custom Chips Kick Off Substantial Volume

The core catalyst for Citi’s substantial rating upgrade comes from the strategic partnership agreement between AMD and social media giant Meta Platforms (META.US). According to disclosures, the two sides signed a multi-year AI data center GPU supply agreement covering a computing power scale of 6 GW, with 160 million share warrants attached. The first 1 GW batch will begin delivery in the second half of 2026 and continue into 2027.

Citi expects that each GW supplied will correspond to about $15 billion in revenue for AMD. This means that under this cooperation framework, Meta alone could contribute nearly $90 billion in potential revenue to AMD. Malik judged in the report that, with the lower total cost of ownership offered by the custom MI450 chip co-developed with Meta, AMD is expected to win “the largest share” of Meta’s future GPU procurement.

“We now believe AMD is becoming a truly reliable second choice in the GPU market and is likely to win the vast majority of market share at Meta,” Malik wrote.

Based on the above cooperation and broader market expansion expectations, Citi substantially raised its financial forecasts for AMD’s AI business, predicting it will reach $33 billion in 2027 (up 137% YoY) and $50.8 billion in 2028 (up 54% YoY).

CPU Flank Remains Robust

It is worth noting that the analyst is not simply bullish on AMD’s bet on the GPU track; its CPU business fundamentals continue to be favored by Wall Street.

After Computex Taipei, Malik upgraded his model estimates for the total addressable market (TAM) of CPUs in 2030 from $132 billion to $137 billion. He still believes that AMD will continue to be “a key beneficiary of the CPU renaissance wave,” with advantages including leading performance, increased core counts, x86 instruction set architecture, a richer SKU product line, and comprehensive capabilities in both multi-threaded and single-threaded workloads.

When comparing AMD’s upcoming Venice CPU with competitor Nvidia’s (Vera) and Intel’s (Diamond Rapids) products, Malik believes AMD’s products are superior. He expects the Venice series to cover around 8 to 256 cores, capable of handling “multiple workloads,” maintaining performance leadership, and meeting diverse computing demands.

Just one day before Citi’s upgrade on AMD, Bank of America had already raised AMD’s target price from $500 to $560 and listed AMD as its top pick in the CPU sector. Bank of America analyst Vivek Arya raised the 2030 server CPU TAM estimate substantially from the previous $125 billion to $170 billion, seeing agentic AI as a strong catalyst for demand in this sector.