AMD might find itself struggling to keep up in the AI race, but it still has plenty of potential in more mature markets, analysts say.
Advanced Micro Devices (AMD) shares dropped about 18% in 2024 as the company struggled to meet investors’ expectations for its efforts to develop and sell chips for artificial-intelligence applications.
The share slump followed AMD’s sharp rally in 2023 when the shares doubled due to the excitement around AI-related growth potential.
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Last year, rivals such as Broadcom (AVGO) and Marvell Technology (MRVL) rallied 108% and 83%, respectively.
While Nvidia (NVDA) recently stalled, the AI-chip-market leader surged more than 170% in 2024. making the stock one of the top Nasdaq performers last year.
Now, with the White House cracking down on AI-chip exports to China, AMD might face a tougher road ahead. But that’s not the end of the AMD story.
Advanced Micro Devices CEO Lisa Su. AMD’s Q4 revenue outlook fell just short of Wall Street predictions.
Challenges mount for AMD in AI expansion
AI is a big part of AMD, but the company’s AI-market share remained significantly lower than that of Nvidia, which dominates the market for AI graphics processors.
According to data by Jon Peddie Research, Nvidia now holds a 90% share in the GPU market, while AMD accounts for roughly 10%.
Related: Analyst overhauls AMD stock price target as gap with Nvidia widens
In October 2024, AMD reported its Q3 results, meeting earnings expectations and exceeding revenue forecasts. But its Q4 revenue outlook fell short of Wall Street predictions. The company estimated revenue at $7.5 billion, below the $7.55 billion consensus analyst estimate.
AMD also faces challenges in meeting the growing demand for its AI processors, with CEO Lisa Su suggesting that chip supplies could be tight in 2025.
“And going into the next few quarters going into 2025, I think we expect that the environment will continue to be tight, but we’ve also planned for significant growth going into 2025. And so we feel good about our overall supply chain capability,” Su said on the company’s Q3 earnings call.
“The concern from here is that AMD won’t be able to provide upside to [Wall] Street estimates that are already $8 billion-$9 billion for calendar 2025,” Jefferies analysts said following AMD’s earnings, Reuters reported.
AMD is scheduled to report Q4 and full-year 2024 financial results on Feb. 4 after the closing bell.
Analysts mixed on AMD stock in 2025
On Jan. 13, KeyBanc analyst John Vinh lowered AMD’s price target to $150 from $220 and affirmed an overweight rating.
KeyBanc sees negative impacts for AMD as demand for the MI325 GPU has been weaker than expected, largely because it offers only minor improvements over its predecessor, the MI300.
Related: Goldman Sachs analyst revisits AMD stock price target as slump extends
KeyBanc also says a significant portion of the growth in AMD’s MI3XX series GPUs for 2025 is expected to come from the MI308, a China-focused version. However, excluding the MI308, growth in the MI3XX series is limited, the investment firm says.
While the AI outlook for AMD is “somewhat disappointing,” KeyBanc says, it maintains its overweight rating on the stock as it believes the lull is transitory.
“We expect AMD to be more competitive with MI355 in the second half and to contribute to more meaningful growth in 2026,” the analyst wrote.
Loop Capital has initiated coverage of AMD with a buy rating and a $175 price target.
The investment firm’s analyst points out that AMD’s stock has been trading in line with peers that are focused on more mature markets, such as PCs, smartphones and industrial products.
Loop believes, however, in AMD’s potential growth in accelerated computing and its unique opportunities to gain market share in PCs and general-purpose servers.
The firm also highlights that AMD’s market-share growth in servers has gained more attention recently, especially as Intel (INTC) faces challenges in this area.
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Cathie Wood, chief executive of Ark Investment Management, who is known for actively trading tech stocks, on Dec. 31 bought 82,456 shares of AMD, reflecting a buy-the-dip strategy she often uses.
AMD shares at last check were up 1.9% at $118.25. In the week through Jan. 14, the stock had dropped 10%.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
