Advanced Micro Devices Inc (NASDAQ: AMD) is pushing significantly to the upside this morning after announcing a material increase to its share repurchase authorisation.
On Wednesday, the company’s board authorised another $6 billion worth of buybacks, reflecting “confidence in AMD’s strategic direction, growth prospects and ability to consistently generate strong free cash flow.”
The chipmaker is now authorised to repurchase about $10 billion worth of its stock in total.
AMD’s extended program “has no termination date,” as per its press release today.
At the time of writing, AMD shares are up more than 50% versus their low in early April.
Why is the buyback announcement significant for AMD stock?
AMD choosing to expand its existing buyback program is a meaningful development for investors, given repurchases often suggest the management currently sees the stock as undervalued.
Additionally, buybacks decrease the number of outstanding shares, which can trigger an increase in earnings per share.
A higher EPS tends to attract investors and strengthen the company’s stock price.
Share repurchase initiatives are positive also because they create buying pressure, helping stabilise a firm’s stock price during volatile markets.
AMD stock has been in a sharp uptrend in recent weeks as the Trump administration continued to sign trade agreements with global leaders.
Most recently, the White House even agreed to a 90-day pause on reciprocal tariffs on China as well.
Still, Advanced Micro Devices shares are down more than 8.0% versus their YTD high at writing.
AMD has secured a sizable deal from Saudi Arabia
Investors are cheering AMD stock also because the chipmaker has recently inked a multi-year AI infrastructure deal with Humain – a subsidiary of the Saudi Arabia Public Investment Fund.
The said collaboration will “deploy up to 500 megawatts of AI infrastructure, powered by the full spectrum of AMD compute,” as per the multinational’s press release on Wednesday.
The Saudi agreement made Bank of America analyst Vivek Arya raise his price target on Advanced Micro Devices in a research note this morning to $130.
His upwardly revised price target on AMD shares represents potential upside of another 9.0% from here.
Why is Bank of America bullish on AMD shares?
BofA is positive on AMD stock as “Sovereign AI nicely complements commercial cloud investment with a focus on training and inference of LLMs in local culture, language, and needs.”
Plus, it could help boost power availability for data centres in the US as well, BofA analyst Vivek Arya told clients in a research note on Wednesday.
Note that the Kingdom, more broadly, has recently pledged up to $600 billion worth of investments in the US.
That said, the AI stock remains unattractive for income investors since it does not currently pay a dividend.
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