Daiwa Capital Markets has shifted its recommendation on Advanced Micro Devices, lowering the stock to Outperform from Buy after a substantial run-up in the share price, even as it increased its price target to $500 from $250 on the heels of a strong first-quarter performance.
Analyst Louis Miscioscia described AMD's results for the period reported on May 5 as "very good." The company posted revenue of $10.3 billion, a 38% year-over-year increase, which exceeded the Street estimate of $9.9 billion by $361 million. Gross margins came in at 55.4%, marginally above guidance, while AMD's revenue guidance for the second quarter of $11.2 billion topped consensus by $682 million and implies year-over-year growth of roughly 46%.
Alongside the quarter, AMD raised its longer-term outlook. The firm doubled its 2030 estimate for the x86 total addressable market to more than $120 billion and increased its compound annual growth rate projection to 35% from 18%. Company management also signaled confidence in profitability ahead, expecting to exceed $20 in earnings per share within the next three to five years.
Despite the positive operational indicators, Daiwa's decision to lower its formal rating reflects concern about the magnitude of recent share-price appreciation. "Given the appreciation of almost 150% over the past 60 days, near term it could moderate," Miscioscia wrote, noting that the downgrade stems from valuation considerations rather than a change in the firm's constructive view on AMD's growth trajectory.
In updating its model, Daiwa raised its 2026 revenue estimate to $49 billion and its 2026 EPS forecast to $7.25. For 2027, the firm lifted revenue and EPS estimates to $72.7 billion and $12.85, respectively. The newly set $500 price target equates to 39 times Daiwa's 2027 earnings per share forecast.
The move illustrates a common analyst response when operational momentum is strong but market prices have already run materially ahead of fundamentals - recalibrate valuation expectations while keeping the underlying growth thesis intact.
Clear summary
Daiwa downgraded AMD from Buy to Outperform after the stock rose nearly 150% in 60 days, even as it increased the price target to $500 following a robust Q1 that beat revenue and margin expectations and included a bullish long-term outlook from management.