Bank of America supports AMD: Server demand is booming, and Helios AI racks bring new growth points

According to the Zhitong Finance APP, Bank of America stated in its weekly outlook report on the semiconductor market that due to "exceptionally strong" demand for server processors, AMD (AMD.US) is expected to achieve better-than-expected quarterly results and raise its guidance. The bank reiterated its "Buy" rating on AMD and raised the target price from $550 to $620.

Bank of America analyst Vivek Arya stated in the research report: "Benefiting from the continuous growth of EPYC processor market share, strong cloud demand, and stable supply outlook, we expect AMD to achieve better-than-expected performance and raise its guidance. The company's third-quarter performance guidance may include the shipment volume of the first batch of MI455X 'Helios' rack servers, with significant growth in shipments expected in the fourth quarter (with quarterly revenue expected to exceed $6 to $7 billion by the end of the fourth quarter). Given that AMD has the most extensive AI CPU product portfolio, its sixth-generation EPYC Venice processor will also be launched alongside Helios in the third quarter, and management may further emphasize that AI for agents will be beneficial for the CPU business. Management provided a server CPU market size of $120 billion in May, and they may revise this number upward again."

AMD will announce its second-quarter results after the U.S. stock market closes on August 4, which is seen as one of the highlights of the August "computing power chain" earnings disclosures. Prior to this, AMD will hold the Advancing AI conference in San Francisco, USA, from July 22 to 23, where it will showcase the latest AI infrastructure, architecture, and development technologies. Reports indicate that the core highlight of this conference will be AMD's first-ever rack-level AI system—the Helios platform based on the Instinct MI455X GPU.

Regarding other chip companies, Arya stated that for Intel (INTC.US), stronger pricing, especially in the server market, may offset concerns about weakness in the personal computer market.

Arya added: "Investor focus may still be on product margin prospects (first-quarter operating margins were about 600 basis points higher than the average level for 2025) and progress in the foundry business (multiple 18A-P and 14A customer collaboration projects are underway), while the upcoming progress of the 18A process server Diamond and Coral Rapids projects is crucial for Intel's server market share outlook (we expect market share to reach 24% by 2030, down from 41% in 2025)."

Arya indicated that Arm (ARM.US) may face some negative impacts in the short term due to weakness in the smartphone market, but its entry into the server market will provide performance support in the second half of this year.

He stated: "Short-term licensing revenue is primarily determined by smartphone shipment volumes, and smartphone sales may decline by more than 10-15% year-on-year in 2026, with little substantial recovery expected in 2027. The benefits of upgrading mobile architecture (from v8 architecture to v9, CSS architecture) have basically been realized; significant server CPU orders from Google Axion, Microsoft Cobalt, etc., may not contribute to performance until the second half of 2026 to 2027 The supply-demand gap for medium to long-term General Artificial Intelligence (AGI) CPUs may become a key variable: the company's management expects market demand to reach $2 billion in the fiscal year 2027-2028, while supply is only $1 billion, indicating a continued positive trend in overall AI CPU demand.

It is worth noting that the semiconductor sector in the U.S. stock market has recently experienced a sharp correction, yet Bank of America remains optimistic about the sector. In a report last week, the bank stated that after the Philadelphia Semiconductor Index surged 88% in the second quarter, it experienced an 11% correction in the third quarter, which coincides with the historical seasonal weakness of the sector, representing a "healthy reset" rather than a trend reversal