Market Analysis

On Tuesday, Piper Sandler maintained its Overweight rating on Advanced Micro Devices (NASDAQ:AMD) stock, with a steady price target of $175.00.

The firm's stance follows AMD's announcement of its intent to purchase ZT Systems for $4.9 billion in a combined cash and stock transaction. The acquisition is seen as a strategic move to enhance AMD's system-level offerings, particularly in board, box, and rack-level performance.

According to the firm, AMD's acquisition of ZT Systems, a company with approximately 1,000 engineers, is expected to close a significant gap in its product lineup. This move could bolster AMD's competitiveness, especially against its primary rival, NVIDIA (NASDAQ:NVDA).

While AMD has been recognized for its silicon-level solid capabilities and growing software expertise, its system performance was previously considered lagging behind competitors.

The addition of ZT Systems is anticipated to bring valuable rack-level expertise to AMD, complementing its existing board-level proficiency. This could enhance AMD's influence in the design of servers and racks, an area where it seeks to strengthen its position.

Piper Sandler's affirmation of the Overweight rating reflects a positive outlook on AMD's market potential, particularly in light of the proposed acquisition. The firm has reiterated AMD as its top large-cap pick in the sector, indicating confidence in its strategic direction and potential for growth.