Meta - AMD AI deal boosts scale but extends high capex cycle , analysts say

<p>Bank of America reiterated its ‘Buy’ ratings on both <a href="https://finance.yahoo.com/quote/META">Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB)</a> and <a href="https://finance.yahoo.com/quote/AMD">Advanced Micro Devices Inc (NASDAQ:AMD, XETRA:AMD)</a> following their newly announced multi-year AI infrastructure agreement, arguing the deal strengthens long-term positioning for both companies despite higher capital intensity and potential dilution.</p>
<p>On Meta, the analysts said the agreement to deploy up to 6 gigawatts of AMD Instinct GPU capacity beginning in the second half of 2026 reinforces a structurally higher investment cycle.</p>
<p>“We think the deal suggests structurally elevated capex baseline, with investment levels likely to remain high for an extended period (or at least through 2026-2029),” the analysts wrote.</p>
<p>The firm maintained its $885 price objective, compared to current levels of $652, and continues to model $120 billion in fiscal 2026 capex and $142 billion in 2027, in line with Meta’s guidance range.</p>
<p>Strategically, Bank of America views the partnership as beneficial. A multi-supplier approach should improve pricing leverage and reduce long-term compute costs, while the performance-based warrant for up to 160 million AMD shares could provide financial upside.</p>
<p>“Infrastructure supply at scale should provide Meta with flexibility to expand beyond core advertising into AI subscriptions, enterprise offerings, or developer ecosystems over time,” the analysts wrote.</p>
<p>They cautioned, however, that the scale and duration of the commitment may limit Meta’s ability to adjust spending and increase exposure to rapid AI silicon transitions. A higher fixed-cost base could also amplify earnings volatility in a macro downturn.</p>
<p>For AMD, Bank of America said the Meta deal meaningfully enhances earnings power, even accounting for potential dilution of up to roughly 10% tied to the warrant structure. “We view the deal as a positive step forward for AMD's long-term vision of &gt;$20+ EPS,” the analysts wrote.</p>
<p>The firm estimates each 1GW deployment represents roughly $17.5 billion to $20 billion in revenue opportunity at 30% to 35% EBIT margins. Even with dilution, Bank of America projects 13% to 23% upside to calendar 2030 earnings, implying $22 to $25 in EPS versus management’s target of above $20.</p>
<p>The agreement also reinforces the growing role of CPUs in AI infrastructure. “AMD's announcement today further supports our view that CPUs are becoming increasingly more important in AI inference,” the analysts wrote, noting Meta is expected to become a lead customer for AMD’s next-generation Venice CPU.</p>
<p>Bank of America maintained its ‘Buy’ rating and $280 price objective on AMD, adding that while the deal increases competition in AI accelerators, Meta’s anticipated $150 billion-plus annual capex leaves room for multiple suppliers across the ecosystem.</p>
<p>AMD shares traded hands at $211 on Wednesday afternoon.</p>