Advanced Micro Devices shares moved lower again Friday following a price target and ratings change from a top Wall Street analyst tied in part to a new challenge for the AI chipmaker heading into 2025.
Advanced Micro Devices (AMD) , while currently running a clear and distant second to Nvidia NVDA in the global for AI-powering chips and processors, is also seeing a new and accelerating challenge in the market for personal computers and servers.
Softbank-owned Arm Holdings, which went public in late 2023 with a $5 billion IPO that valued the group at around $55 billion, collects licensing fees from its chip designs and further royalties from individual sales.
It’s also taking a larger piece of the global PC market, a secondary division for AMD behind its AI-focused data center segment, with CEO Rene Haas predicting a commanding 50% share of the Windows PC market market 2029.
AMD shares have lost nearly $80 billion in market value over the past three months.
TheStreet/Shutterstock/David Becker/Stringer/Getty Images
Goldman Sachs analyst Toshiya Hari noted the group’s recent advances in a note that lowered both its rating and price target for AMD heading into its fourth quarter earnings report later this month.
AMD share price underperformance
Having added the stock to his ‘buy’ list in November of 2020, Hari noted that the shares have underperformed the S&P 500 over that time, rising 50% compared to the benchmark’s 72% gain.
The shares seen recent weakness, as well, falling more than 33% over the past six months, well south of the 9.4% decline for the PHLX Semiconductor Sector benchmark and have shed around $65 billion in value since its disappointing sales and profit outlook in late October.
Related: Analyst overhauls AMD stock price target as gap with Nvidia widens
“Although we remain constructive on AMD’s ability to take share from Intel in x86-based compute across PCs and traditional servers, we are increasingly concerned [over] the rise of Arm-based custom CPUs and heightened competition in accelerated computing,” Hari and his team wrote.
Hari said Arm’s rise will weigh on its revenue growth prospects, add to operating expenses and weigh on the stock’s price to earnings multiple.
He downgraded the stock to ‘neutral’ from ‘buy’ and lowered his price target on the group by $46 to $129 per share.
AMD needs to regain market confidence
“We believe this underperformance stems from weakness in PC and traditional end-demand, as well as slower-than-expected growth in Data Center GPUs,” Hari said. “We now expect the stock to remain range-bound until the market regains confidence in AMD’s future growth and margin trajectory.
AMD, which is slated to report its fourth quarter earnings on Jan. 28, told investors in October that MI300 sales could rise to more than $5 billion this year, with overall revenue in the region of $7.5 billion.
More AI Stocks:
Veteran fund manager reveals startling AI stocks forecast for 2025Meta’s new vision could change both AI and social mediaAnalysts reveal AI stock picks for 2025, including Palantir
Analysts are looking for a bottom line of $1.08 per share with data center revenue of $4.15 billion, client revenue of $1.95 billion and gaming and embedded revenue totaling around $1.4 billion.
AMD shares were marked 1.92% lower in premarket trading to indicate an opening bell price of $119.50 each.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
