Piper is concerned about a slowdown in the PC market and the vulnerability of high-growth technology stocks.
Advanced Micro Devices AMD, the semiconductor giant, was downgraded Thursday by Piper Sandler to neutral from overweight.
“Our downgrade is driven by a combination of factors:
1) Our concerns about a slowdown in the PC market during 2022,
2) The earnings and growth headwind from closing the Xilinx deal, and
3) The broader market dynamics around high-multiple, high-growth technology stocks,” Piper analyst Harsh Kumar wrote in a commentary cited by CNBC.
“Given these three dynamics, we feel there is more downside risk than upside risk.”
AMD agreed in October to buy fellow chip maker Xilinx for $35 billion. But the deal has been delayed by Chinese regulatory review.
Kumar cut his share-price target for AMD to $130 per share from $140. It recently traded at $126.68, down 1%. It has slumped 8% in the last month, joining the general slide in technology stocks as interest rates rise.
TheStreet.com’s Wall Street Memes producer Bernard Zambonin offered a positive outlook for AMD earlier this month.
“The gaming and console markets — dominated by a few huge players such as Microsoft and Sony — will continue to spur strong growth demand for semi-custom chips,” he wrote.
“Meanwhile, Meta [Platforms] FB is using AMD chips to power the metaverse, and there are numerous uses for chips in electric and autonomous vehicles. They’re already quite present in Tesla cars.”
Bottom line: “All these bullish trends mean AMD stock could keep growing strong throughout 2022, even if some think its valuation is too high,” Zambonin said.
