By Kit Norton

Advanced Micro Devices got a big promotion on Monday and it paid off immediately. The chip stock popped, ready to snap a two-day losing streak.

The lift came from Goldman Sachs, which raised its price target on expectations of strong second-quarter earnings, robust guidance, and un-ending artificial-intelligence demand.

AMD shares advanced 10% to $569.66, placing them near the top of the S&P 500. Investors were piling back into the chip stock after it sold off last week.

The stock has soared 167% this year and has gained 324% over the past 12 months. Shares have been driven higher mostly by demand for the company's AI-optimized central processing units, or CPUs, and Wall Street doesn't expect demand to lessen any time soon.

Goldman Sachs analysts, led by James Schneider, late Sunday raised their AMD price target to $640 from $450 and maintained their Buy rating on the stock. Despite the stock's more than 300% gain over the past year, Goldman's price target implies 12% upside from current trading levels.

"We see a constructive setup heading into the quarter drive by CPU demand for agentic AI an and AI infrastructure spending," Schneider wrote.

Based on this, Goldman Sachs expects AMD to report "strong" second-quarter earnings in August along with a solid outlook.

"Comments on new customer engagement should drive 2027 data center estimates and the stock higher," Schneider wrote, specifically targeting company commentary on its partnerships with Meta Platforms and ChatGPT-owner OpenAI.

While the analysts see the second-quarter earnings call as the key near-term catalyst for AMD, investors will get an earlier update on the status of the company when it holds its "advancing AI" event on July 22 and July 23.

Schneider called the event a "positive catalyst" and anticipates that AMD will likely present a "constructive outlook for the strength and sustainability in server CPU demand."

Overall, Goldman Sachs sees upside for AMD, Applied Materials, and On Semiconductor. But the firm sees downside for KLA and Arm Holdings in the semiconductor space with a weak smartphone market hitting Arm and an industry-wide shift in memory deployment reducing the need for some KLA services.

Write to Kit Norton at kit.norton@barrons.com

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