Advanced Micro Devices reported its second consecutive spectacular quarter. And aside from AMD chief Jerry Sanders, perhaps no one is more vindicated than Needham & Co. analyst Tad LaFountain. You might recall LaFountain was the lone analyst that had a "strong buy" rating on AMD last year when you couldn't give away AMD shares. AMD had manufacturing problems and was getting clobbered by Intel. AMD bet the whole company on its Athlon chip and won big. "I take comfort that the stock is down and no one likes it," said LaFountain at the time. We thought he was nuts. What a difference a year makes. After about year, AMD has rocketed up to about $65 (£40.92) a share. If you had listened to LaFountain last year you would have been up nearly 400 percent. AMD has made LaFountain look pretty good. AMD nearly doubled Wall Street estimates Wednesday with first quarter earnings of $1.15 a share. It also issued a strong outlook. LaFountain's theory on stocks is decidedly old school. He buys low, sells high and realises returns are proportional to the risks you take. That's why he was comfortable with a "strong buy" when AMD was in the dumps. That's also why LaFountain put a "strong buy" on Cypress Semiconductor about $50 before Morgan Stanley upgraded the stock last month. LaFountain's theory sounds like common sense, but a lot of big-time analysts don't subscribe to it. Through Wednesday, seven analysts still rate AMD a "hold." Where were these analysts when AMD was soaring? They were waiting for the herd. Under this theory, analysts would much prefer to ride AMD from $65 to $100 even though the returns are much better riding shares from $13 to $70. Given that there are seven analysts left to "discover" AMD, you can bet shares will continue to gain. Those seven analysts will have to upgrade AMD after its most recent quarter and bullish outlook. Once these latecomers hop on the bandwagon, AMD shares will soar some more. We, along with LaFountain, will be very interested in hearing the holdout analysts explain why they were so late to the party. The AMD situation is very similar to the Apple comeback. The Apple fundamentals improved well before analysts started cheering. AMD is the same way. Revenue topped $1bn in AMD's first quarter and the product roadmap has to make Intel sweat. Once the remaining holdouts join the AMD parade, you should watch AMD shares closely. Mass psychology often means mass psychosis. That's when things get tricky. LaFountain has already seen the Wall Street herd coming. The Needham analyst quietly downgraded AMD last week to a "buy" from a "strong buy." Don't worry the fundamentals are fine. "Everything we said last year has come true," he said. LaFountain said AMD has a clear advantage with its Athlon chip and a cyclical uptick for flash memory. Meanwhile, LaFountain said Intel, which is rated a "hold," is distracted by its love affair with communications chips. Once those analysts-come-lately start talking up AMD, shares could double based on earnings optimism. If that happens, look for LaFountain to once again run the opposite direction of the herd. "At $15, you gotta have AMD," said LaFountain. "At $65, you should buy it. At $105 you should hold it. And at $145 you should allow someone else have the privilege of holding it." Sure Athlon gets all the attention, but flash memory, which is used in wireless phone and handheld devices, is putting AMD over the top. AMD's flash memory sales were $327m in the first quarter, up more than 150 percent from a year ago. AMD inked memory pacts with Cisco Systems and Alcatel. Sanders said flash memory demand is outpacing wireless phone demand. AMD didn't break out the bottom line effect from flash memory, but we know memory is a feast or famine business. AMD, like memory companies Micron Technology, Atmel and others, is feasting. Officials were also very optimistic on the conference call with analysts, who seemed to be falling in love with AMD and its blowout quarters. "We're currently doing almost everything right," said Sanders. But Sanders and company seemed to be low-balling Wall Street with its guidance. AMD projected "modestly higher" sales in the second quarter, but outlined a product roadmap that should boost revenue easily. Officials were bullish about AMD's "Thunderbird" and "Spitfire" chips. When asked why the second quarter guidance wasn't more optimistic given the company plans to grow at a 50 percent clip this year, Sanders had a quick answer. "We want to make sure we deliver," he said. That'll be sweet music to Wall Street. What do you think? Tell the Mailroom. And read what others have said. See ZDII for US tech investor news. See techTrader for more technology investment news, plus quotes and research.