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AMD Joins Nvidia and Tesla in Most Active Stock Options as Stock Gains

$Advanced Micro Devices(AMD)$   joined $NVIDIA Corp(NVDA)$   and $Tesla Motors(TSLA)$   in the three most active stock options Thursday morning after analysts at HSBC and Citigroup raised their price target on the stock as the chipmaker benefitted from increasing demand in artificial intelligence applications. 

Shares of AMD advanced for a third straight session, taking the stock price near the highest since October. The gains bolstered the odds that a number of call options could be in the money before they expire tomorrow. 

More than 703,000 call and put options changed hands so far, landing AMD in third place for the most active options, according to the ranking that excludes exchange traded funds. Nvidia's rival attracted a bigger volume than $Apple (AAPL.US)$ and $SoFi Technologies (SOFI.US)$.   

Call options that give the holder the right to buy AMD shares at $145 by tomorrow attracted the heaviest trading so far, with volume reaching 55,040 contracts as of 11:37 a.m. in New York, almost four times the open interest. That strike price is now less than $2 above the current stock price.

HSBC analyst Frank Lee doubled his price target on the stock to $200 from $100, and lifted his rating on the stock to a buy from hold because of the positive outlook on the company's artificial intelligence pipeline, Investor's Business Daily reported. 

Citigroup analyst Christopher Brett Danely also raised his price target on the stock to $145, from $120, while maintaining his rating at neutral. The average price target on the stock over the next 12 months has risen to $136.16 from $129.26 a month ago, data compiled by Bloomberg show. 

"The year-to-date rally in the stock reflects investor belief that AMD has become the established number two player in the GPU space,” Argus analyst Jim Kelleher wrote in a note to clients Monday, referring to graphic processing units by their acronym. Nvidia is the current market leader. 

Last month, AMD CEO Lisa Su said the company's MI355, a powerful GPU, can deliver up to 40% more tokens per dollar than competing solutions. The GPU is designed for high performance computing and AI tasks. 

The company's biggest customers, including $Meta Platforms (META.US)$, OpenAI, $Microsoft (MSFT.US)$ and $Oracle (ORCL.US)$ are helping AMD narrow its competitive gap with Nvidia, Kelleher said.  

"Major customers are inclined to support a vibrant competition among top-tier suppliers as it benefits the customer in the long run,” he said.

After this year's 19% rally, the stock is now trading at 36.5X forward earnings, compared with Nvidia's 37.55X. 

AMD is expected to report a 27% revenue growth to $7.4 billion when it releases financial results next month, according to analysts' estimates compiled by Bloomberg. That's slower than the 51.6% growth expected for Nvidia. 

Despite the stock rally, big investors/speculators are taking millions of dollars in bearish positions in AMD options. 

At 10:21:41, an active seller got a $6.14 million premium for selling call options that give their holder the right to buy 123,000 AMD shares at $120 each in 707 days. That block trade represented about 44% of the total volume so far. 

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