Analysts are increasingly more bullish on AMD’s technology and potential in the critical artificial intelligence market after the news that Tesla is using the company’s intellectual property.

CNBC reported on Wednesday that Tesla is working with AMD to develop its own AI chip for self-driving cars. The electric car maker has more than 50 employees involved in the project, according to a source.

“The Tesla/AMD move has disruptive implications to the multi-billion self-driving market,” Rosenblatt Securities’ Hans Mosesmann wrote in a note entitled “Tesla AI Move With AMD – Game Changer” on Wednesday.

“AMD has had zero play in the self-driving market. Also, AMD is the only player in the world that can offer both x86 CPU and strong GPU IP and expertise … 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,” he added.

AMD’s stock is up 118 percent in the past 12 months through Wednesday compared with the S&P 500’s 16 percent gain. That performance ranks No. 2 in the entire S&P 500, according to FactSet.

Mosesmann reiterated his buy rating on AMD shares and his $22 price target, representing 60 percent upside from Wednesday’s close.

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.

He also said that 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 after 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.