Advanced Micro Devices, Inc. (AMD) and Intel Corp (INTC) both caught a nice tailwind Tuesday after KeyBanc analyst John Vinh upgraded both chipmakers, pointing to accelerating demand for AI servers even as traditional cloud infrastructure takes a breather.

The Cloud Infrastructure Picture

Here's what's happening in the data centers: December cloud data revealed a modest pullback in traditional servers as providers retired older instances, Vinh noted. Compute processor instances dropped 2% month-over-month, though they're still up a healthy 11% year-over-year. Total cloud instances followed a similar pattern, falling 2% sequentially but climbing 10% from a year ago.

The story gets more interesting when you break it down by provider. Amazon.com Inc. (AMZN) Amazon Web Services climbed 3% month-over-month. Google Cloud Platform edged up 1%. Alibaba Group Holding Limited (BABA) posted an impressive 30% year-over-year gain despite a 4% monthly decline. Azure, meanwhile, struggled with a 6% monthly drop and an 8% year-over-year decline.

Intel's Momentum Play

Vinh's analysis favored Intel over AMD on near-term instance momentum, and the numbers back that up. While Intel instances overall declined 3% month-over-month, the company's newest Granite Rapids generation jumped 12% monthly to 1,933 instances, powered by AWS deployments.

The broader Intel picture looks solid too. Emerald Rapids rose 2% month-over-month and Sapphire Rapids increased 6% monthly, pushing combined latest-generation Intel growth up 4% month-over-month. Vinh called the tracker's implications positive for Intel and neutral for AMD.

AMD Holds Its Ground

AMD held flat month-over-month in December, with processor instances up 16% year-over-year. Turin instances grew 4% monthly to 2,252 after a sharp jump the previous month, supported by deployments across Alibaba, AWS, and Google Cloud Platform.

Genoa instances rose 1% month-over-month, mainly on AWS and Google Cloud, pushing combined latest-generation AMD growth (Turin and Genoa) up 2% monthly.

The Valuation Case

Vinh upgraded AMD from Sector Weight to Overweight with a $270 price target based on 34x his 2026 EPS estimate of $7.93. He noted that AMD trades at 32x the 2026 consensus EPS versus peers averaging 27x.

Intel also got upgraded from Sector Weight to Overweight with a $60 price target based on 4.0x enterprise value to sales on his 2026 revenue estimate of $57.8 billion. Intel currently trades at 4.3x consensus enterprise value to sales versus a three-year median of 2.6x.

Price Action: AMD stock jumped 6.14% to $220.30 at last check Tuesday. Intel climbed 3.15%.