The demand for compute resources is escalating due to the rise of agentic artificial intelligence, prompting Piper Sandler to initiate coverage on several compute companies.
The firm has assigned an overweight rating to both Advanced Micro Devices (AMD) and Nvidia, setting a price target of $600 for AMD, which represents a 15% upside from its recent closing price, and a $300 target for Nvidia, indicating a potential 34% increase.
Analyst David O'Connor highlighted that as AI models evolve, the need for compute capacity for both training and inference grows, leading to a year-to-date increase in GPU prices of 25% to 40%. Nvidia is recognized as the leader in AI compute, although its stock performance has been subdued compared to competitors.
O'Connor noted that securing large contracts with enterprise clients could enhance Nvidia's stock narrative. Meanwhile, AMD is gaining market share in CPU chips as demand for agentic AI rises, although it needs to expand its customer base beyond existing clients like OpenAI and Meta.
Piper Sandler also initiated coverage on Broadcom and Arm with overweight ratings, citing attractive valuations in the compute sector, while assigning neutral ratings to Qualcomm and Intel, suggesting that Intel's positive outlook is already reflected in its stock price and expressing uncertainty about Qualcomm's new product offerings