“We now believe AMD is becoming a truly credible second option in the GPU market and is poised to capture the vast majority of Meta’s market share,” Citi wrote.
Thanks to strong market interest in CPUs, shares of chipmaker AMD (AMD.US) have performed robustly this year. However, in the view of Citi analysts, investors should not overlook its potential in GPUs.
In a recent research report, the bank upgraded AMD's stock rating from 'Neutral' to 'Buy' and significantly raised its price target from USD 460 to USD 575.
AMD’s share price has more than doubled year-to-date, primarily fueled by demand for its AI-optimized CPUs. However, Citi analyst Atif Malik’s bullish outlook is largely based on AMD’s GPU sales prospects—particularly as the company directly competes with market leader NVIDIA (NVDA.US).
Malik stated plainly in the report that the market’s current valuation logic for AMD is flawed. Most investors still regard AMD primarily as a CPU play, and the current share price implies only about a 60% probability that AMD will achieve over USD 50 billion in GPU revenue by 2028. In his view, this significantly underestimates the wave AMD is poised to generate in the GPU market.
Meta’s Multi-Billion-Dollar Order: Custom Chips Begin Meaningful Volume Shipments
The key catalyst behind Citi’s substantial upgrade stems from AMD’s strategic partnership agreement with social media giant Meta Platforms (META.US). According to disclosed details, the two parties have signed a multi-year supply agreement for AI data center GPUs with a total compute capacity of 6 gigawatts (GW), accompanied by warrants for 160 million ordinary shares. Initial deliveries of the first 1 GW are scheduled to commence in the second half of 2026 and continue through 2027.
Citi estimates that each gigawatt of supply corresponds to approximately USD 15 billion in revenue for AMD. This implies that Meta alone could contribute nearly USD 90 billion in potential revenue to AMD under this collaboration framework. Malik noted in the report that AMD, leveraging the lower total cost of ownership offered by its co-developed custom MI450 chips with Meta, is well positioned to capture the 'largest share' of Meta’s future GPU procurement.
“We now believe AMD is emerging as a truly credible second option in the GPU market and is poised to win the vast majority of Meta’s market share,” Malik wrote.
Based on this partnership and broader market expansion expectations, Citi has substantially revised upward its financial forecasts for AMD’s AI business, projecting revenues of USD 33 billion in 2027 (a 137% year-over-year increase) and USD 50.8 billion in 2028 (a 54% year-over-year increase).
CPU Segment Remains a Strong Growth Driver
Notably, analysts are not solely bullish on AMD’s bet on the GPU segment; its CPU business fundamentals continue to garner strong support from Wall Street.
Following Computex Taipei, Malik revised his model forecast for the total addressable market (TAM) for CPUs in 2030 upward from $132 billion to $137 billion. He still views AMD as a key beneficiary of the ongoing 'CPU resurgence,' citing advantages such as performance leadership, increased core counts, the x86 instruction set architecture, a broader SKU portfolio, and robust capabilities across both multi-threaded and single-threaded workloads.
In comparing AMD’s upcoming Venice CPU against competing offerings from NVIDIA (Vera) and Intel (Diamond Rapids), Malik believes AMD holds a clear edge. He expects AMD’s Venice series to span approximately 8 to 256 cores, supporting 'a wide range of workloads' while maintaining performance leadership and addressing diverse computing requirements.
Just one day before Citi upgraded AMD, Bank of America had already raised its price target for AMD from $500 to $560 and named it its top pick in the CPU space. Bank of America analyst Vivek Arya significantly increased his 2030 server CPU TAM estimate from $125 billion to $170 billion, citing agent AI as a powerful catalyst for demand in this segment.