Investing.com – Advanced Micro Devices rallied to a 13-year high Monday, as investors cheered news that the chipmaker is set to be the main chip supplier for Microsoft's (NASDAQ:MSFT) next-generation console set to launch at the end of 2020.
Microsoft announced that its new Xbox, dubbed "Project Scarlett" for the time being, would be powered by custom-designed processor made by AMD.
Advanced Micro Devices (NASDAQ:AMD) surged nearly 5% and was just below session highs of $34.30. It's set for its highest close since May 2006.
The announcement comes as Wall Street continued to praise AMD, with Bank of America (NYSE:BAC) lifting its price target on the chipmaker on expectations the upcoming console refresh would prove more profitable than the previous one.
The bank said the news implies "solid" 2020 estimates for the semi-custom and console businesses and the "potential for better pricing and margins than prior (2013) console refresh."
Bank of America Merrill Lynch reiterated its buy rating on AMD and raised its price target on stock to $40 from $35.
Wells Fargo, meanwhile, said that while the news had been expected, it should still be considered a positive as it reinforces AMD's positioning in the high-end processor and graphics market for game consolers.
AMD's ongoing momentum, partly bolstered by rival Intel's (NASDAQ:INTC) chip-shortage woes, has seen its share price jump 84% year to date, assuming today's gains hold. That's forced even some of naysayers on Wall Street to change their tunes on the stock. The chipmaker has been scooping up new business at the lower end of market, providing chips to manufacturers who haven't been able to source them from Intel.
Morgan Stanley last week upgraded AMD stock to equal weight and conceded that its previously cautious outlook on Advanced Micro Devices stock had been the "wrong call." They're not alone. The average 12-month target price on the stock among 34 AMD analysts polled by Investing.com was $29.97 Monday afternoon.