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Investors Bullish on AMD's AI Partnership with Tesla

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Shares of Advanced Micro Devices (AMD - Free Report) opened higher on Thursday as investors continued to react to reports that the trendy chipmaker is working with Tesla (TSLA - Free Report) to develop AI processors for self-driving cars.

On Wednesday afternoon,CNBC reported that the two companies were working together on the autonomous car chip, and according to the publication’s source, Tesla has assigned more than 50 employees to the project.

Just a few hours after the initial reports emerged, analysts were already reacting to the partnership. In response to the news, Rosenblatt Securities analyst Hans Mosesmann reiterated his “buy” rating for AMD and praised the new relationship.

“The Tesla/AMD move has disruptive implications to the multi-billion self-driving market,” Mosesmann said. “The net/net here for AMD is that Tesla has confirmed AMD's CPU and GPU roadmaps in a field that nobody was considering as viable; it says that AMD's CPU/GPUs in PC and server markets are the real deal.”

Mosesmann wasn’t the only analyst to view the Tesla/AMD partnership has a validation of AMD’s technology. In a note to clients on Thursday, Jefferies analyst Mark Lipacis also reiterated his “buy” rating on AMD and echoed a very similar sentiment.

“While we would not expect shipments of AMD chips to Tesla to have a material impact near term to AMD bottom line … we think this would constitute a critical win for AMD as it would support our thesis that with its parallel processing GPUs, AMD is a beneficiary,” Lipacis wrote.

AMD shares popped more than 5% in afternoon trading on Wednesday. On Thursday, the stock opened another 1% higher but quickly sunk into the red—along with the markets as a whole.

AMD has gained more than 118% over the past year, making it one of the biggest movers in the red-hot semiconductor space. For now, the stock is currently sporting a Zacks Rank #3 (Hold).

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