AMD's stock surges for second straight day on upbeat analyst outlook and retail mania

AMD stock jumped again Tuesday, rising another 4% in premarket after rallying a ridiculous 24% the day before. That surge came right after the company locked in a major deal with OpenAI, the same day Jefferies slapped a massive upgrade on the stock.

The brokerage firm hiked AMD’s price target from $170 to $300, a bold 82% increase, and moved the rating from “hold” to “buy.” That $300 call represents almost a 50% jump from where AMD closed on Monday, which was $203.71.

The Jefferies call wasn’t just some surface-level optimism. Analysts there laid out an even bigger upside case, $400 per share, if the AI server market goes even faster and AMD eats more of Nvidia’s lunch.

If that scenario plays out, AMD shares would nearly double from where they’re sitting now. The stock’s Monday surge alone dragged the Nasdaq Composite to a new all-time high. AMD soared, and in a twist, Nvidia dropped. That role reversal didn’t go unnoticed on the street.

OpenAI takes 10% stake as AMD commits massive GPU power

The big trigger behind this price explosion is AMD’s newly announced deal with OpenAI. The company behind ChatGPT is giving AMD a vote of confidence, and up to a 10% stake, in exchange for years’ worth of GPU rollout. The plan is to deploy 6 gigawatts of AMD Instinct GPUs over several years, which is a serious buildout (measured in gigawatts, not just chips), proving just how massive the AI infrastructure race has become.

Blayne Curtis, analyst at Jefferies, called it a “multi-generational opportunity” in a note to clients Monday night. He admitted the upgrade wasn’t even on the table before the announcement, but the deal “forced his hand.” His note said, “AMD will still have to hit milestones, but this is a strong validation of AMD’s AI roadmap and the level of AI demand in general.”

Blayne added that OpenAI has already been “on a spending spree,” cutting non-binding deals with Nvidia, Oracle, and Samsung/Hynix, all pointing to a massive land grab for compute capacity and energy-hungry data centers.

The agreement isn’t signed in blood, but the size and ambition show that OpenAI sees this as a long-haul investment in compute. And if the numbers hold up, AMD may find itself stealing even more share from Nvidia, especially as AI players look to diversify supplier exposure amid surging demand.

Investors split on AI profits while bubble fears grow

On CNBC’s “Halftime Report” Tuesday, Josh Brown from Ritholtz Wealth Management said he’s not blind to the bubble, but said people need to get over the idea that everything is hype. “Of course, there’s a bubble,” he said. “But that doesn’t mean there aren’t real projects that are going to have world-transforming outcomes.”

He warned against throwing all AI bets into the “speculative” bucket, saying investors should still take some of them seriously. At the same time, Brown didn’t deny things are getting frothy. “Anytime you have an environment where there’s this much enthusiasm for a new technology, and there are literally trillions of dollars being spent, not all of that spending is going to have a nice ROI at the end of the rainbow,” he said.

Tuesday’s broader market action reflected some of that tension. The Nasdaq Composite closed down 0.7%, even though it had just touched a fresh high the day before. Oracle led a wave of pullbacks in other AI-related names, like Nvidia, Western Digital, and SanDisk.

That move came after The Information reported that Oracle’s cloud business saw slimmer-than-expected profit margins on Nvidia sales for the quarter ending in August.

That triggered fresh fears that while AI stocks might look unstoppable on the surface, revenue might not keep up. Brown added that when this bubble finally gives, it might just be a fizzle, not a crash. “Most of the time, you’ll just see certain names blow up, you’ll see valuations contract [and] you’ll see a couple of years of sluggish share price growth as we digest some of the excess,” he said. “It doesn’t always have to be the Nasdaq down 85%.”

And with OpenAI onboard and analysts gunning for $300 to $400 targets, traders aren’t easing off the gas.

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