Wall Street sees a new leg of artificial intelligence infrastructure boom taking shape, particularly as the industry shifts its attention from pure model training to complex, interactive deployment.
GPUs are still the hottest sellers, but CPUs are also back in demand owing to the AI race. Meta Platforms, Inc. (NASDAQ:META) and NVIDIA Corporation (NASDAQ:NVDA) recently announced an expanded deal to supply data center CPUs and GPUs, competing in Intel’s core CPU territory.
Advanced Micro Devices, Inc. (NASDAQ:AMD) also announced its own massive multi-year infrastructure partnership with Meta Platforms, Inc. (NASDAQ:META), which will involve servers running the company’s Venice and next-generation Verano CPUs. Reinforcing this demand is also Intel Corporation (NASDAQ:INTC)’s CEO Lip-Bu Tan, who cited AI as a major driver for CPUs.
Egorov Artem/Shutterstock.com
The Backdrop
Backing these figures, Raymond James analyst Simon Leopold upgraded Advanced Micro Devices, Inc. (NASDAQ:AMD) from Outperform to Strong Buy with a price target of $641. The firm sees AMD likely to overtake names such as Intel in the central processing unit market.
The firm anticipates the server CPU market to grow at a 44% five-year compound annual growth rate to approximately $201 billion in calendar year 2030. Besides conventional datacenter demand, the two other factors backing this figure are CPUs hosting and coordinating accelerators, as well as CPUs supporting agentic workloads.
The Bull and Bear Case for AMD
The designer and manufacturer of CPUs offers “the strongest combination of direct earnings leverage, datacenter positioning and market-share gains,” as per analyst Simon Leopold.
This is why the firm believes that AMD’s growth should enable it to overtake Intel during 2027. For the second quarter, AMD’s share of the x86 client CPU market crossed 30%. This is a robust figure against Intel, which has control of 69.7% of the market, as per data from Mercury Research.
With AI expanding the overall CPU market and AMD gaining ground, it stands to benefit from both market growth and company-specific gains.
At the same time, Raymond James has also warned that more workload doesn’t automatically signal an increase in CPU demand. This is because higher utilization, software efficiency, custom silicon and offload can absorb part of the increase.
Intel and Arm Aren’t Standing Still
Raymond James has extended its model through calendar year 2028 and updated estimates for all three: Arm, Intel and NVIDIA. This is broadly consistent with NVIDIA’s $200 billion long-term framework and below AMD’s $220 billion estimate. Nvidia’s long-term framework matching with estimates lends credibility to the longer-term thesis.
Speaking of Intel, the company has recently launched the Xeon 6+ processor family, competing directly with AMD’s EPYC server CPUs in data centers and enterprise workloads. While Intel is a competitor for AMD, there is also a greater threat from Arm Holdings as well.
The Arm AGI CPU stands as a challenge for AMD as well, albeit not an immediate threat. Arm projects an estimated $15 billion in AGI CPU revenue by 2031, putting it in direct competition not just with AMD and Intel, but also competing for workloads addressed by NVIDIA’s CPUs and with Arm’s own licensees.
Hedge Fund Analysis
Hedge funds are seen increasingly building positions in AMD stock, up from 134 in the first quarter of 2026 to 164 in Q2. Nvidia stands out with the most robust positioning, up from 275 to 285. Intel also saw hedge funds increasing positions from the previous quarter, up by 26 to 138. Meanwhile, ARM holdings is the least held, with only 52 hedge funds holding position in the stock.
Bottomline
Overall, AMD is seen as one of the strongest ways to play the CPU side of the AI buildout, characterized by its direct earnings leverage, datacenter positioning and market-share gains. However, the CPU opportunity is attracting Intel, Nvidia, and Arm as well.
READ NEXT: NVIDIA (NVDA): What Foxconn and Super Micro Are Telling Us about the AI Boom and Snowflake (SNOW) Stock: AI Growth Is Real, But Is the Valuation Already Priced In?
Disclosure: None. Follow Insider Monkey on Google News.
