Piper Sandler says AI is causing ‘insatiable demand’ for compute capacity. These two stocks will benefit most
The rise of agentic artificial intelligence is making compute even more in demand than it was before. Piper Sandler thinks two major players are set to be winners amid the crunch. The investment firm initiated coverage on a slew of compute names, including Advanced Micro Devices and Nvidia with overweight ratings. It also placed a $600 price target on AMD, a 15% gain from Wednesday’s close, and a $300 price target on shares of Nvidia, implying a 34% rise from Wednesday’s closing price. As AI continues to develop, the buildout is in a feedback loop that only creates a greater and greater need for more compute, analyst David O’Connor wrote in a Wednesday note. “AI models continue to get more intelligent and useful with every generation,” O’Connor said. “Compute is the enabler of this intelligence on the training side as models get bigger/smarter and on the Inference side as consumers start to use these models (Agentic AI). This translates into an insatiable demand for compute capacity for both Inference and training.” This increase in demand can be seen in GPU prices, he said, which are up between 25% to 40% year-to-date. O’Connor said Nvidia is the market leader in AI compute, as well as moving quickly on innovation and product development. However, shares have been relatively quiet compared to some of its competitors. He said gigawatt deals with enterprise customers can start turning around that story for the stock. NVDA AMD YTD line Nvidia v. AMD year-to-date. Meanwhile, AMD is benefitting as agentic AI increases the demand for CPU chips, where it has made market share gains against Intel. It also is making share gains against Nvidia on inference. But O’Connor added the company needs to make more announcements to get gigawatts online with new customers beyond its core base: OpenAI, Meta and Anthropic. Piper also initiated coverage on Broadcom and Arm with overweight ratings, as O’Connor said compute names’ valuations are relatively cheap. “On average, we estimate 45% EPS CAGR for the group to 2030, and we find ~30% upside to names with a P/E multiple range of 14-22x across names,” he wrote in the note. “We see this as a buying opportunity.” Piper also initiated coverage on Qualcomm and Intel , where it placed neutral ratings. It believes much of the good news at Intel is priced in, and it lacks sufficient conviction with Qualcomm’s High Bandwidth Compute product.
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