Advanced Micro Devices and Arm Holdings are poised to outperform as artificial intelligence providers increasingly embrace central processing units (CPUs) and other specialized hardware to power new AI agents, according to UBS. The Swiss-based investment bank has a buy rating on both chipmakers, raising its 12-month share price target on AMD to $670 from $470, implying 29% upside from Tuesday's close. UBS also hiked its target for ARM, to $455 from $260, or 28% above the last close. "We raise estimates for AMD and ARM as key beneficiaries of standalone CPU and head node deployments," analyst Timothy Arcuri said Wednesday in a note to clients. "We do see accelerating traction in standalone CPU racks with the architectural split … playing out." Demand for CPUs has taken off amid the advent of agentic AI — systems that are designed to act autonomously. A shift to use CPUs alongside more traditional graphics processing units has translated into massive growth for AMD and ARM. AMD has soared 153% in just the past three months alone, while Cambridge, England-based ARM British-based stock has soared 171% in the same span. AMD ARM 3M mountain AMD and ARM shares in the past three months Widening adoption of CPUs is likely to continue benefiting AMD, which both designs and manufactures CPUs, "given its advantage in core count, multithreading, and x86 [processor's] historically strong software ecosystem for traditional software workloads that are now increasingly part of the agentic AI workloads," according to Arcuri. CPUs' increased popularity in AI should also boost shares of ARM, a newer chip player. ARM came public in Sept. 2023. "ARM's core competency lies in latency and efficiency – which aligns well with hyperscaler needs," Arcuri wrote. Bullishness at UBS matches the consensus on Wall Street. Of 53 analysts covering AMD, 45 give it a buy or strong buy rating, LSEG data shows. ARM has received buy or strong buy ratings from 25 analysts, more than half of the 40 on Wall Street who cover the stock.
<small>Source: CNBC</small>
