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Published: Jan. 16, 2024 at 1:41 p.m. ET

Advanced Micro Devices Inc.s stock is closing in on its record closing high amid a sharp Tuesday surge that reflects growing optimism for the companys opportunities in artificial intelligence.

The stock AMD is up more than 7% in midday action to a recent $157.67. That puts it less than 3% away from its all-time closing high of $161.91 achieved Nov. 29, 2021.

AMDs...

Advanced Micro Devices Inc.s stock is closing in on its record closing high amid a sharp Tuesday surge that reflects growing optimism for the companys opportunities in artificial intelligence.

The stock AMD is up more than 7% in midday action to a recent $157.67. That puts it less than 3% away from its all-time closing high of $161.91 achieved Nov. 29, 2021.

AMDs Tuesday stock rally comes amid a broader gains for chip stocks, with the PHLX Semiconductor Index SOX up 1% despite a slightly negative day so far for the Nasdaq Composite Index. Shares of Nvidia Corp. NVDA are up 2.8%, while shares of Micron Technology Inc. MU are up 2.3%.

Opinion:How Nvidia and AI changed the landscape of the chip industry, as rivals must now play catch-up

KeyBanc Capital Markets analyst John Vinh recently chimed in with upbeat commentary on AMDs server business, dramatically boosting his expectations for the companys MI300X accelerator for AI applications.

We are seeing a pretty significant increase in demand for AMDs MI300X suggesting that the software performance issues late last year have largely been resolved, he wrote in a Tuesday note to clients.

Vinh thinks that Microsoft Corp. MSFT will ramp its use of the MI300X graphics processing unit in the first quarter, while other customers such as Meta Platforms Inc. META and Oracle Corp. ORCL

Currently, we believe theres demand for [500,000] MI300X GPUs, which would represent ~$8B in data center GPU revenues in 2024, which is significantly higher than our prior expectations of $3B-$4B, he wrote. Additionally, supply chain partners indicate that AMD has increased its CoWoS [Chip-on-Wafer-on-Substrate packaging] capacity and has the ability to support further upside if additional demand materializes.

See also: If Nvidia looked more like Salesforce, it might unlock billions more in cash, analyst says

Vinh sees 24% upside for AMD shares, having raised his price target to $195 from $170.

Elsewhere in the chip sector, Taiwan Semiconductor Manufacturing Co. Ltd. shares

While this years Taiwan election has been closely watched by global financial markets amid elevated geopolitical concerns, the outcome for [Democratic Progressive Partys] victory is in line with general expectations, JPMorgan analyst Grace Ng wrote in a note to clients.

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AMDs stock soars, narrowing in on record close as AI optimism swells - MarketWatch