One Wall Street analyst sees 17% upside for Advanced Micro Devices Inc.

Over the past year or so, theAdvanced Micro Devices (NASDAQ: AMD)It's artificial intelligence (AIOne of the beneficiaries of the rapid popularization of AI is the MI300X processor. The chipmaker has been working hard to capture a slice of the AI chip market, launching its long-awaited MI300X processor late last year.

While AMD has risen 84% in the past year, one Wall Street analyst believes there is more upside to come.

Strong demand and conservative forecasts

Analysts at Baird have just reiterated their "outperform" (buy) rating on AMD stock, while maintaining their $200 price target. That suggests a potential upside of 17% from Friday's closing price, and the analysts acknowledge reports that a cloud infrastructure operator has cut orders for AMD's MI300X data center chips, but suggest that the operator may have intentionally over-ordered.

As evidence, the analyst pointed out.NvidiaA similar order cut was experienced late last year, as demand far outstripped supply and customers scaled back orders "to better match shipment expectations". Baird also believes there is "considerable upside" to AMD's revenue expectations for this year.

The analysts' view is hardly convincing. Demand for generative AI has accelerated over the past few quarters, with companies scrambling to adopt these productivity-enhancing algorithms. The development of AI is still in its early stages, and Wall Street's expectations of the total mass of the market continue to rise. In addition, it's essentially a two-horse race: AMD chips are a viable, lower-cost alternative to Nvidia's AI processors, which have been in short supply.

Koon's management seems to be conservative in its guidance, expecting first quarter revenue to be flat year-over-year at $5.4 billion. That may be too pessimistic, especially in a period of accelerating demand for artificial intelligence. In addition, AMD posted sequential and year-over-year growth in the fourth quarter, giving the company momentum going into the first quarter.

Finally, AMD's price-to-earnings (PEG) ratio is below 1, which is the standard for an undervalued growth stock.

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Danny Vena has a position in Nvidia.The Motley Fool has recommended Advanced Micro Devices and Nvidia.The Motley Fool has a disclosure policy.

Advanced Micro Devices Has 17% Upside, One Wall Street Analyst Says was originally published by The Motley Fool.