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AMD stock could get a boost from an 'acceleration in market share gains': analyst

AMD may be in the position to gain market share in the competitive chip space.

Baird analyst Tristan Gerra upgraded AMD stock to Outperform in a new note. Gerra sees the stock popping 35% to $100. The stock gained 2% in pre-market trading to nearly $74.

Gerra thinks AMD's new Genoa chips, released last week, will further widen its competitive moat.

"Supply chain checks highlight strong reception of Genoa (5nm Zen 4) at data center OEMs, which are shifting significant resources in support of AMD," Gerra wrote. "Genoa's very significant performance step up should translate into an acceleration in market share gains for AMD in 2023, along with significantly higher pricing and a higher gross margin profile, reinforcing AMD's EPYC performance leadership for years to come."

AMD could use a win after the PC slowdown and cooling data center growth both weighed on its once-surging business in the third quarter amid a larger slowdown in the chip space. The company was forced to incur a $160 million charge for inventory and pricing adjustments in its graphics and client businesses.

An AMD Ryzen Threadripper 3970X processor, taken on December 5, 2019. (Photo by Olly Curtis/Future Publishing via Getty Images)
An AMD Ryzen Threadripper 3970X processor, taken on December 5, 2019. (Photo by Olly Curtis/Future Publishing via Getty Images)

For the fourth quarter, AMD sees sales rising 14% year over year —a slowing pace from the 29% growth delivered in the third quarter as customers use the backdrop of a moderating economy to reign in spending.

"I think what's happening is: Enterprise is weak," AMD CEO Lisa Su told analysts on an earnings call. "I think that is overall people — businesses are just being more cautious. China is weak and has been weak all year. And then in cloud, in general, there's not in general."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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