Advanced Micro Devices (AMD) received another downgrade on Thursday, days after Goldman Sachs and HSBC downgraded the stock. Wolfe Research analyst Chris Caso downgraded AMD from Buy to Peer Perform on Thursday. Caso also trimmed his rating on AMD shares and removed his $210 price target. Shares of semiconductor manufacturers such as Nvidia, Marvell Technology, and Applied Materials saw gains following Taiwan Semiconductor Manufacturing’s earnings report on Thursday. However, AMD’s stock lagged, dipping 0.1% to $119.83 in morning trading.Invezz takes a look at why are analysts losing faith in the stock, and a likely silver lining
AMD’s data-center GPU revenue is below expectations
Wolfe Research downgraded AMD after trimming its first-quarter revenue and earnings forecasts.The firm now expects $6.6 billion in revenue and 80 cents per share in earnings, down from $7.04 billion and 93 cents per share, respectively.These revised figures fall short of Wall Street’s consensus of $7.04 billion and 95 cents per share.The downgrades stem from weaker-than-anticipated data-center GPU revenue, a critical component of AMD’s product line for AI workloads.Graphics processing units (GPUs) are pivotal for training machine learning models, but Wolfe Research highlighted that AMD’s data-center GPU business is “running below expectations.”The firm also slashed its full-year revenue estimate to $29.9 billion, a sharp drop from its previous projection of $33.6 billion, citing slow PC seasonality, gaming revenue weakness, and competitive pressures.Other challenges include slow personal-computer seasonality coming off a strong fourth quarter and continued weakness in gaming revenue, Caso said.
AMD stock: rising competition in AI and custom CPUs
Goldman Sachs lowered its AMD rating from “Buy” to “Neutral” and cut its price target from $175 to $129.Analyst Toshiya Hari expressed concerns about rising competition in accelerated computing and the growing adoption of Arm-based custom CPUs, which could disrupt AMD’s revenue growth.While AMD has made strides in taking market share from Intel in x86-based computing, Goldman Sachs noted the company faces increasing challenges in maintaining its momentum.Additionally, AMD’s operating expenses are expected to rise, which could pressure profit margins.Goldman Sachs pointed out that AMD’s stock has risen 50% since being added to their Buy list on November 4, 2020.However, this performance trails the S&P 500’s 72% increase over the same period.Hari said this is because AMD’s growth in data-center GPUs has been slower than anticipated, further dampening optimism about its competitive position in AI.
AMD’s AI chip roadmap ‘less competitive’
HSBC delivered a double downgrade, lowering AMD’s rating from “Buy” to “Reduce” and cutting its price target to $110 from $200.The firm raised concerns about AMD’s AI chip roadmap, calling it “less competitive” than initially expected.HSBC analysts noted weaker demand for AMD’s MI325 GPU and questioned the potential of its upcoming MI350 chip to compete effectively with Nvidia’s dominant AI offerings.HSBC also reduced its fiscal 2025 AI GPU revenue forecast for AMD from $12.3 billion to $8.1 billion, well below the consensus estimate of $9.5 billion.The analysts warned of further downside, with AMD shares already losing 24% over the past three months.
MI350 chip series could act as a ‘catalyst’ for AMD
There is some optimism for AMD’s future. Analyst Caso highlighted that the upcoming MI350 chip series, set to launch in the second half of the year, could act as a “catalyst” for the company.Unlike the MI325, which focuses primarily on increasing memory capacity, the MI350 is expected to feature a more substantial redesign and significant upgrades.Additionally, Dell Technologies recently announced plans to integrate AMD processors into its corporate-targeted computers for the first time.This move, previously limited to Dell’s consumer PC lineup, signals potential market share gains for AMD in the client computing segment, Caso noted.More By This Author:US Stocks Soar Following Better-Than-Expected Inflation Data And Strong Earnings Reports GBP/USD Analysis: Here’s Why The Pound Could Crash To 1.2000 US Stocks Edge Higher As Traders Eye Inflation Data And Earnings Season Kickoff
