Wall Street is gushing over AMD on its A.I. chip relationship with Tesla

In similar fashion, another analyst said the Tesla news is a validation of AMD’s technology.

“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 [of the next big technology shift],” Jefferies analyst Mark Lipacis wrote Thursday.

The analyst also said if Tesla is focusing on AMD technology for its future autonomous driving efforts, investors may wonder about Nvidia’s expected dominant position in the new market over the short-term.

Currently Tesla vehicles use Nvidia graphics processing units as part of the Autopilot self-driving hardware.

“We believe the headline risk to NVDA in the near term will not be favorable; we do not see a clear long-term risk,” Lipacis wrote. “From a volume perspective, Tesla represents less than 1% of the global autos market, and we think the potential to segment the market may be a possible alternative to another sole-source supplier transition.”

The Jefferies analyst reaffirmed his buy rating for AMD and his $19 price target for the stock.

AMD shares closed up 5 percent Wednesday following the Tesla news. Its shares are up another 1.3 percent in Thursday’s premarket session on the bullish Wall Street reaction. On the flip side, Nvidia shares are down 1.8 percent in the premarket.

— CNBC’s Jordan Novet contributed to this report.

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