Shares of Advanced Micro Devices Inc. (NASDAQ: AMD) and Intel Corporation (NASDAQ: INTC) posted significant gains on Tuesday following an upgrade by KeyBanc analyst John Vinh, who cited expanding server demand attributed to artificial intelligence (AI) applications. This development underscores shifting dynamics within cloud infrastructure and semiconductor sectors as market participants adjust their outlooks based on evolving compute needs.
KeyBanc's recent evaluation drew upon cloud service instance data from December, which exhibited a slight pullback in traditional server usage. Providers have begun phasing out older server instances, contributing to a 2% month-over-month decline in compute processor instances. Nevertheless, annual comparisons reflected a more optimistic picture, with a year-over-year increase of approximately 11% in the same metric. This dual trend indicates a transition phase within the server market, balancing legacy retirement with emerging demand drivers.
Mixed Monthly Trends Across Cloud Providers
The detailed cloud instance data reveals heterogeneous momentum among major cloud platforms. Amazon Web Services (AWS), a dominant market player, recorded a 3% increase in instances month-over-month, supporting sustained growth. Google Cloud Platform (GCP) experienced a modest 1% monthly increase, maintaining positive but tempered expansion.
Alibaba Group Holding Limited, despite facing a 4% sequential decline in December, demonstrated robust growth over the year with a substantial 30% increase in cloud instances, highlighting significant long-term demand growth amid short-term fluctuations. Conversely, Microsoft's Azure platform faced decreased utilization, declining 6% month-over-month and 8% year-over-year, reflecting sector variances and region-specific demand factors.
Intel's Advancements Outpace AMD in Near-Term Server Deployments
John Vinh's analysis indicated a preference for Intel's momentum over AMD's in the near term, driven largely by recent generational processor uptake. Intel's overall instance count declined 3% month-over-month; however, its newest Granite Rapids generation witnessed a notable 12% monthly rise in instances, reaching 1,933 deployments. This growth has been driven primarily by AWS engagements, signaling confidence in Intel's cutting-edge technology offerings.
Adjacent Intel processor generations also contributed positively: Emerald Rapids grew 2% month-over-month, while Sapphire Rapids climbed 6% over the same period. When combined, these latest-generation Intel processors exhibited a solid 4% month-over-month growth rate, suggesting ongoing traction in server markets.
In contrast, AMD maintained stable month-over-month instance levels, reflecting steady demand rather than acceleration. Overall processor instances increased 16% year-over-year, underpinned by gains in newer AMD processors. Turin generation instances rose 4% month-over-month to 2,252 following a sharp increase in the previous month, with deployments spread across Alibaba, AWS, and GCP platforms. Similarly, Genoa processor instances increased 1% sequentially, primarily led by AWS and GCP demand, culminating in a 2% combined month-over-month growth for AMD's latest-generation processors (Turin and Genoa).
Valuation and Rating Upgrades Influenced by AI Server Demand Prospects
Based on these data points, Vinh upgraded both AMD and Intel stocks from Sector Weight to Overweight ratings, reflecting positive near to medium-term prospects aligned with AI-driven server demand. For AMD, a price target of $270 was established, which corresponds to a 34 times multiple on the analyst’s 2026 earnings per share (EPS) estimate of $7.93. The current consensus indicates that AMD trades at approximately 32 times its 2026 EPS, compared with peer averages near 27 times, suggesting a relative premium justified by growth potential.
Intel’s upgraded price target is set at $60, informed by an enterprise value-to-sales (EV/S) multiple of 4.0 times against Vinh’s projected 2026 revenue of $57.8 billion. Intel currently trades at 4.3 times consensus EV/S, exceeding its three-year median EV/S multiple of 2.6 times, reflecting increased investor optimism despite the premium valuation.
Market Response and Broader Observations
Following these upgrades, AMD shares rose by 6.14%, closing at $220.30 during Tuesday’s trading session, while Intel’s stock increased by 3.15%. This market reaction indicates positive investor appetite for semiconductor companies poised to benefit from escalating AI workloads and subsequent server demand growth.
Additionally, investors track movements in cloud providers closely as proxies for compute demand dynamics. AWS’s consistent growth supports the optimism linked to Intel’s Granite Rapids adoption, whereas variable performance from other cloud platforms underscores sector complexity.
Investors should note that while AI-related server demand supports an optimistic outlook, server instance data convey nuanced trends including both declines in traditional segments and uneven growth across providers, which may impact semiconductor deployment rates.
Key Points
- KeyBanc analyst upgraded AMD and Intel stocks, citing robust AI-related server demand contributing to improved outlooks.
- December cloud data showed a 2% month-over-month decline in compute processor instances but an 11% year-over-year increase, reflecting legacy server retirements alongside emerging demand.
- Intel’s newest Granite Rapids processors experienced a 12% month-over-month increase in deployments, primarily driven by AWS, while AMD’s latest-generation processors held steady with moderate growth.
- Valuation metrics supported upgrades: AMD’s price target at $270 based on 34x 2026 EPS estimate; Intel’s target at $60 using 4.0x EV/S on 2026 revenue forecast.
Risks and Uncertainties
- Sequential declines in traditional server instances may signal headwinds for near-term processor deployment, affecting revenue recognition.
- Variable cloud provider performance, with some platforms contracting monthly, could impact overall compute demand unpredictably.
- Premium valuations for AMD and Intel relative to peers introduce execution risk if anticipated growth does not materialize.
- Overreliance on AI-driven server demand projections may expose investors to technology adoption timing uncertainties.