AMD Stock Up Pre-Market, as Microsoft Partnership Boosts Sentiment

Advanced Micro Devices (NASDAQ:AMD) is riding a wave of positive sentiment, fueled by strong earnings, optimistic analyst forecasts, and a groundbreaking multi-year partnership with Microsoft. 

In recent day's, AMD's stock price has been on a rally, with a notable 8.81% jump on June 16th being supported by a 1.82% gain in this morning's pre-market, reflecting widespread optimism in the semiconductor sector and specific excitement surrounding AMD's strategic moves.

However, the true game-changer for AMD is the newly announced partnership with Microsoft to develop next-generation Xbox consoles and devices. This collaboration aims to integrate advanced AI capabilities and cutting-edge hardware into future gaming systems, promising enhanced graphics, immersive gameplay, and AI-driven experiences. Microsoft's commitment to a user-centric design, with the upcoming Xbox platform being fully compatible with existing game libraries and designed to operate across multiple devices and stores, further solidifies the potential of this partnership.

The collaboration extends beyond consoles. The unveiling of the ROG Xbox Ally, a handheld gaming device co-developed by ASUS and Microsoft, powered by AMD's Ryzen Z2 series processors, signifies a strategic move into the portable gaming market. This device, running on Windows 11 Home and boasting high-performance capabilities, including a 7-inch Full HD display and up to 24 GB of LPDDR5X RAM, aims to provide a premium portable gaming experience, directly challenging competitors in the increasingly popular handheld gaming segment.

Looking ahead, the next-generation Xbox consoles are expected to incorporate dedicated AI hardware, such as Neural Processing Units (NPUs), to enhance gaming experiences through more realistic graphics and dynamic gameplay. Microsoft's plan to implement a “cloud hybrid” model, enabling seamless transitions between local and cloud-based gameplay, also opens up exciting possibilities for next-generation games and expands the reach of the Xbox ecosystem.

Other recent news has also boosted sentiment.

On June 12th, CEO Lisa Su unveiled the MI350 and MI400 series AI chips at the “Advancing AI” conference. The MI400 series, designed to power the new “Helios” AI server slated for 2026, aims to challenge Nvidia's dominance in the high-performance computing space.

The Helios rack, containing 72 chips, represents a significant step in AMD’s Instinct growth strategy, a factor heavily emphasized by Piper Sandler, who recently raised their price target on AMD to $140 from $125, maintaining an Overweight rating.

The endorsement of AMD's chips by OpenAI CEO Sam Altman, who announced plans to adopt them and collaborate on the MI450 design, further validates AMD's technological prowess

AMD's strategic moves extend beyond product development. The company recently announced a $6 billion stock buyback plan, signaling confidence in its long-term prospects and aiming to provide support to its share price amidst concerns about slowing AI-related momentum. This buyback increases AMD’s total repurchase authority to $10 billion, aligning it with other chipmakers employing similar tactics.

Furthermore, the acquisition of Enosemi, a Silicon Valley-based company specializing in photonic integrated circuits (PIC), underscores AMD's ambition to become a comprehensive AI solutions provider. This move positions AMD to compete with Nvidia in the burgeoning field of silicon photonics, enabling faster and more efficient data transmission. Other acquisitions like ZT Systems, Mipsology, and Silo AI, further demonstrate AMD’s commitment to building a robust ecosystem of AI-related technologies.

While analysts have expressed mixed opinions on the acquisition, it reflects AMD's determination to challenge Nvidia's strong position in the AI market. The hiring of Keith Strier, formerly of Nvidia, as senior vice president of global artificial intelligence markets, further strengthens AMD's AI leadership and strategic vision.

The average price target of $130.55 reflects a marginal upside from current price action, although the bullish target of $200 highlights the split that exists on the street.

With AMD's stock having been a significant underperformer over the past 12 months, down 17.8%, the recent shift in sentiment will certainly be welcome news for bulls. This latest announcement could provide the boost that holders have been looking for.