Shares of Advanced Micro Devices (NASDAQ: AMD), commonly referred to as AMD, charged sharply higher on Wednesday, gaining as much as 8.9%. As of 11:34 a.m. ET, the stock was still up 4.9%.
There were multiple positive catalysts that fueled the artificial intelligence (AI) specialist’s rally, including beneficial regulatory changes, rising Wall Street sentiment, and plans for a robust share buyback.
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Everything’s coming up roses
The day began on a positive note, as the U.S. Department of Commerce announced that it was rescinding the “AI Diffusion Rule.” The policy framework, developed during the Biden administration, limited the sale of the most advanced AI chips to companies in foreign countries as a way to limit the development of AI by U.S. adversaries. The regulations were generally reviled by chipmakers, as they felt the rules were too restrictive.
Analysts were quick to see the positive side of these changes. Analysts at BofA raised their price target on AMD to $130 up from $120, while maintaining a buy rating on the stock. This represents potential upside of 17% compared to Tuesday’s closing price. The easing of these regulations will benefit AMD by boosting sales, according to the analysts.
The news comes on the heels of the announcement that AMD and Nvidia are partnering with Saudi Arabian company Humain to build a 500-megawatt data center in the country.
Finally, AMD announced a new $6 billion share repurchase authorization, bringing its total allowance to $10 billion. “Our expanded share repurchase program reflects the Board’s confidence in AMD’s strategic direction, growth prospects, and ability to consistently generate strong free cash flow,” said AMD Chair and CEO Lisa Su.
The valuation is attractive
Despite the growing AI opportunity, AMD is priced at 29 times next year’s sales, offering an attractive way to benefit from the AI revolution.
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Bank of America is an advertising partner of Motley Fool Money. Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Bank of America, and Nvidia. The Motley Fool has a disclosure policy.
