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Last night, AMD, the big chipmaker with that huge artificial intelligence exposure, they held an important analyst meeting right here in New York City. You never know what you're going to get from these analyst events. I mean, sometimes there's news fest, sometimes there's a big deal. This one was a huge deal, which is why AMD stock shot up 9% today.
Now, AMD's already had a phenomenal run with the stock catching fire last month when they announced a massive deal with OpenAI. They're selling OpenAI 6 gawatt worth of GPUs as part of a multi-year agreement. Now, we don't have specific numbers, but management says the deal will be worth tens of billions of dollars in revenue.
In less than four weeks after the announcement, the stock shot up 62% falling to a new all-time high of 26 $267 and change. Big. After that though, MD pulled back hard as the entire market seemed to turn against the AI data center space. Even when the company reported a strong quarter last week, it barely got credit for it.
Stopped gaining 2.5% in response last Wednesday, but still finishing the week deeply in the red. Still going into last night's analyst meeting AMD was up nearly 100% year-to date. So, it felt like the onus was on management to justify this colossal move right here. And you know what they did. CEO Lisa Sue laid out how how far AMD's come in recent years taking share in both CPUs that's really from Intel uh for the PC and GPUs for the data center and yes that is share from Nvidia.
Overall the company's data center revenue has gone from $2 billion in 2020 to more than 16 billion this year now accounting for nearly half of the business. At the same time AMD's had big success in its PC gaming and embedded systems businesses including chips for cars and surgical robots. smaller but important.
Of course, this is a very much of a what have you done for me lately market. So, let's focus on what AMD had to say about the future. Management rolled out what it calls the four pillars of the strategy going forward. They want to extend their compute technology leadership, expand their data center leadership, open up software platforms and developer enablement and power AI everywhere.
On the technology leadership front, AMD talked about their positions in CPUs and GPUs, but they also mentioned they've gotten into all sorts of auxiliary products like networking and interconnects and advanced packaging. I think they made a very good case for why AMD should be AMD should be considered a technical leader among the universe of semiconductor companies that are not named Nvidia.
In terms of the data center, AMD said they expect the total addressable market, it's called a TAM, to expand at a 40% compound annual clip, growing from $200 billion this year to north of 1 trillion in 2030. They're talking about doing 10% market share in AI semiconductors and networking. That'd be a staggering amount of business.
Keep in mind, this is the one chipmaker that comes close to rivaling Nvidia. So 10% doesn't sound all that crazy to me. In terms of software, AMD is still playing catch-up, which is why they've made a number of acquisitions in recent years. As for powering AI everywhere, they're talking about AI PCs and gaming, plus things like robots.
Management says they have a full ecosystem that covers all these capabilities. But while all of that's impressive, the biggest news last night was AMD's new long-term financial targets. Targets that were they blew your mind. They were much higher than anybody was expecting. And that's really what sent the stock into the stratosphere today.
The targets first imagine offered some remarkable growth targets for the next 3 to 5 years. They say data center AI revenue will rise at an 80% plus compound annual growth rate with the total data center business own growing at a 60% clip. Overall AMD's expects its revenue to rise at a 35% compound annual growth rate for the next 3 to 5 years.
There are not many companies that have anywhere near that. At the same time, management has some great things to say about profitability. AMD expects its gross margins to rise from 54% this year to 55 to 58% over the next 3 to 5 years. Again, staggeringly good. They see their operating margin rising from 24% this year to 35% in 3 to 5 years.
Then AMD projects it can earn more than $20 per share. $20. You can see that's not expensive stock within the next three to five years. Given that they're expected to earn less than $4 per share this year, that's going to be stunning growth. Of course, it's not just that AMD rolled out very bullish financial targets.
It also uh it's also that the the targets, they seem very credible. Take that trillion dollar total adjustable market figure for the data center. Seems crazy, right at first glance. But as Ben Reiches from the Melius research firm to points out, AMD was the first company to issue what he saw as a cartoonish forecast for the data center back in 2023 when it projected the total addressable market for AI semis and network equipment will be worth $400 billion by 2027.
I I remember when she made the projection. I think a lot of people laughed, but now it's widely believed that this forecast was way too low. Righteous thinks that AMD's $1 trillion forecast for 20 2030 may also end up being too low. I think you could be right. But the numbers that AMD presented last night, you almost had to buy the stock in response, especially if you're running a hedge fund.
I mean, I'm not at all surprised to see AMD soaring today because these numbers were so good that the analysts were forced to raise their estimates significantly, which translates into higher price targets, which translates into higher stock prices. Still, can AMD stock keep running? For the past couple of weeks, I've noticed that there's been a shift in Wall Street sentiment.
Investors have gotten more discriminating when it comes to the AI stocks with more focus on who actually has the ability to deliver on the grand promises, means making money. Which brings me back to the financial projections from AMD. These numbers are to some degree an extension of the OpenAI partnership that the company announced a month ago.
At the same time, we didn't have many specifics about what this would mean for AMD sales. Now, we kind of do along with some bullish new information on margins of profits. But all these long-term targets are contingent on AMD doing a lot of business with Open AI starting next year. If you believe Open AAI will honor all of its commitments or can honor all of its commitments that that it's made, the numbers are doable.
If you don't believe it though, then the numbers become, let's say, very stretched goals. Here's the bottom line. Going forward, the story of AMD is all about execution. The stocks already roared in anticipation of phenomenal growth in the data center. Now AMD needs to actually deliver. I think Lisa Sue and her team deserve the benefit of the doubt because historically they've done a great job, but it's still something we need to keep an eye on.
That said, given her multiple years of success at AMD, I am more than comfortable telling you that even up here, you can buy her stock. Let's take some calls. Let's go to Mark in Nevada. Mark, hey Jim. Booya. Booyah. Mark, what's going on? What's going on? Calling about Micron today. I've seen a lot of solid record of positive earnings and surprises.
Good momentum behind the AI trend. I think they got a good business model. I got in at a good price point. I'm just wondering fresh highs. Where do you think this is going and how do you think Micron's going to end up in the future? All right, Mark, great question. Now, they do have this one business called the high bandwidth memory and that is data center and it is on fire.
They Sanreo just said that could happen. There's no I'm not saying there's no stopping Micron. I am saying that Micron right now is on a high level run rate that is going to produce earnings for at least the next year that are going to surprise people. So, I think you've got a good one. I think AMD stock could keep going higher if it executes well and I'm willing to give Nisa Sue the benefit of the doubt that she can deliver on those goals.
Much more money on ahead could sit down with data bricks the software provider has been riding the AI wave to new heights. I'm getting a read on what's next for the private player with the company co. Then is there ever a right time to sell a stock you own? I'm breaking down my thought process around exiting a winning position so you can stay ahead of the market and of course all your calls happy fire. Tonight's edition lightning round stand
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