UBS raises AMD and Arm price targets as CPU demand for agentic AI systems takes off

These chip stocks are surging due to sky-high CPU demand. UBS sees more gains ahead

Advanced Micro Devices and Arm Holdings are poised to outperform as artificial intelligence providers increasingly embrace central processing units (CPUs) and other specialized hardware to power new AI agents, according to UBS. The Swiss-based investment bank has a buy rating on both chipmakers, raising its 12-month share price target on AMD to $670 from $470, implying 29% upside from Tuesday's close. UBS also hiked its target for ARM, to $455 from $260, or 28% above the last close. "We raise estimates for AMD and ARM as key beneficiaries of standalone CPU and head node deployments," analyst Timothy Arcuri said Wednesday in a note to clients. "We do see accelerating traction in standalone CPU racks with the architectural split ... playing out." Demand for CPUs has taken off amid the advent of agentic AI -- systems that are designed to act autonomously. A shift to use CPUs alongside more traditional graphics processing units has translated into massive growth for AMD and ARM. AMD has soared 153% in just the past three months alone, while Cambridge, England-based ARM British-based stock has soared 171% in the same span. AMD ARM 3M mountain AMD and ARM shares in the past three months Widening adoption of CPUs is likely to continue benefiting AMD, which both designs and manufactures CPUs, "given its advantage in core count, multithreading, and x86 [processor's] historically strong software ecosystem for traditional software workloads that are now increasingly part of the agentic AI workloads," according to Arcuri. CPUs' increased popularity in AI should also boost shares of ARM, a newer chip player. ARM came public in Sept. 2023. "ARM's core competency lies in latency and efficiency - which aligns well with hyperscaler needs," Arcuri wrote. Bullishness at UBS matches the consensus on Wall Street. Of 53 analysts covering AMD, 45 give it a buy or strong buy rating, LSEG data shows. ARM has received buy or strong buy ratings from 25 analysts, more than half of the 40 on Wall Street who cover the stock.

UBS flags these 2 stocks as key beneficiaries of standalone CPU By Investing.com

Investing.com -- UBS raised price targets on two chip stocks in a note on Wednesday, identifying both as key beneficiaries of accelerating demand for standalone CPU deployments in agentic AI infrastructure, while pushing back against what it sees as overly aggressive market size expectations. Analyst Timothy Arcuri lifted the bank's AMD price target to $670 from $455 and the Arm target to $470 from $260, based on an unchanged 35x multiple for AMD and a 108x multiple for Arm. He cautioned that while investor enthusiasm around the CPU total addressable market has pushed some estimates toward $300 billion by 2030, UBS steers "such bullish outcomes to a long thesis on MU because we believe DRAM will remain too constrained to enable a TAM that large by 2030." On AMD, Arcuri said the company has "a distinct advantage" in standalone agentic AI racks, which are "more core and throughput-driven." UBS now assumes a 60/40 split between x86 and Arm architectures in the standalone segment and expects AMD to capture an outsized share of incremental demand given Intel's roadmap and supply challenges. AMD CPU server revenues are now forecast at $23 billion in 2027 and $29 billion in 2028, rising to $50 billion in 2030. On Arm, UBS maintained its view that Arm architectures will represent approximately 70% share of a roughly 20 million unit head-node market by 2030. Arcuri raised his estimate for Arm's internal CPU revenue to approximately $14 billion in 2030, reflecting an approximately 8% share of UBS's $170 billion TAM estimate, though he noted current core count limitations will constrain Arm's standalone rack prospects until future product generations.

UBS raises Arm Holdings stock price target to $470 on AI chip outlook By Investing.com

Investing.com - UBS raised its price target on Arm Holdings (NASDAQ:ARM) to $470 from $260 while maintaining a Buy rating on the stock. The stock currently trades at $366.39, down 12.5% over the past week, though it has surged 235% year-to-date with a market capitalization of $391 billion. The firm increased its revenue estimate for Arm's internal CPU product to approximately $14 billion in calendar year 2030, up from a prior estimate of $13 billion. UBS maintained its view that Arm architectures will represent roughly 70% share of an approximately 20 million unit total addressable market for head-nodes by 2030. UBS noted that Arm's core competency in latency and efficiency aligns with hyperscaler needs. The firm said current limitations in core count and throughput will restrict use of Arm's first-generation internal product for standalone AI racks, where workloads need to scale across as many cores on a single machine as possible. The firm said Arm's roadmap of 200 to 500 cores could expand into broader use cases over time, though this likely requires a second or third generation product. UBS raised its estimate for Arm's AI chip revenue to reflect approximately 8% share of its $170 billion total addressable market estimate in the 2030 timeframe. Arm has highlighted hyperscalers including Meta, OpenAI and ByteDance as customers. UBS noted Meta continues to rely heavily on AMD and Nvidia, while ByteDance represents roughly 4% of global deployments. According to InvestingPro data, 19 analysts have revised their earnings upwards for the upcoming period, though the stock trades at a high earnings multiple of 431 times earnings. For deeper insights into ARM's valuation and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro. In other recent news, Arm Holdings has experienced several notable developments. Bernstein and Mizuho both raised their price targets for Arm Holdings to $500, citing the company's strategic position in the AI CPU market. Bernstein highlighted Arm's power-efficient architecture as a key factor for its growth in agentic AI workloads, while Mizuho pointed to Arm's expansion of its AGI CPU platform with partners like Oracle and ByteDance. Additionally, Arm's CEO, Rene Haas, addressed the complexities of restricting AI-capable CPU exports to China, emphasizing the widespread use of these processors and the challenges in distinguishing them from general-purpose CPUs. Haas described CPUs as being integral to the application space, similar to oil, making export restrictions a significant challenge. Both Bernstein and Mizuho maintained an Outperform rating on Arm Holdings, underscoring their positive outlook on the company's growth trajectory in the AI sector. These developments highlight the strategic importance of Arm's technology in the evolving AI landscape. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.