Truist told clients to "buy the weakness" in one major chip company after describing the firm's fourth quarter as messy but encouraging for the long term. Analyst William Stein framed the investment case around an accelerated earnings trajectory that, in his view, dwarfs near-term imperfections.
Stein said the company is growing earnings at a "~45% CAGR through CY30 and trades at only ~11x CY30 EPS power," and reiterated his stance that "it’s still a BUY." Truist noted that fourth-quarter results beat expectations and that guidance for the first quarter came in ahead of forecasts, even while flagging a sizable and unusual contribution to the upside.
According to Truist, "65% of the revenues and all of the EPS beat were from selling a written-down China SKU." The firm emphasized that this distortion does not change management's underlying medium- to long-term outlook: the company reiterated targets of "60% DC CAGR, 35% total sales CAGR," which Truist interpreted as supporting "over $20 of EPS in 2030."
Stein said the bedrock of his bullish view is "strong customer engagement," noting that industry contacts have corroborated momentum behind the company's data-center and AI roadmap.
On the top-line, fourth-quarter revenue of about $10.3 billion beat consensus by roughly 6%, with Truist attributing the outperformance to approximately 9% upside in both the Datacenter and Client segments. The firm highlighted accelerating deployments of Instinct MI350 GPUs and the strong adoption of the fifth-generation Epyc CPUs. Management also signaled confidence in the data-center opportunity, expecting that data-center revenue can grow "more than 60% annually over the next 3-5 years."
Truist acknowledged that operating expenses remain a headwind, but said management has reaffirmed plans to drive operating leverage beginning in 2026. Reflecting its updated view, Truist raised its 2027 earnings estimate to $10.11 and lifted its price target to $283.
In sum, the firm urged investors to focus on the long-term growth narrative as it outweighs the Q4 irregularities: "Buy the weakness as the long-term growth message overwhelms the imperfections in Q4," Stein wrote.
What this means
- The research firm is endorsing a buy strategy based on projected multi-year earnings growth and product adoption in data-center AI workloads.
- Near-term results contained a significant China-related accounting or inventory factor that materially influenced revenue and EPS beats.
- Management reiterated aggressive multi-year growth targets for data-center and total sales while signaling plans for operating leverage in 2026.