Advanced Micro Devices shares moved lower in early Monday trading, extending their notable autumn decline, following a rating and price target downgrade from a top Wall Street analyst.
Advanced Micro Devices (AMD) have lost around $45 billion in market value since the group issued a muted near-term revenue forecast in late October, following its third quarter earnings update, that suggested supply chain pressures would keep demand firmly ahead of production over the coming months.
AMD CEO Lisa Su told investors that MI300 sales could rise to more than $5 billion this year, with overall fourth quarter revenues in the region of $7.5 billion, both of which came in shy of Wall Street forecasts.
That’s left some investors worried that the ramp of AMD’s flagship AI-powering graphics processing unit, dubbed the MI300, could be delayed into the first half of next year even as the longer-term story remains generationally compelling.
AMD CEO Lisa Su told investors in October that the AI accelerator market will “grow at more than 60% annually to $500 billion in 2028”.
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Bank of America analyst Vivek Arya appeared similarly cautious as he lowered his rating on AMD to ‘neutral’ from ‘buy’, and cut his price target by $25 to $155 per share, in a note published Monday.
AMD facing ‘higher competitive risks’
Arya cited “higher competitive risks in AI against best-of-breed Nvidia’s dominance and growing cloud preference for custom chips from Marvell and Broadcom, which limit AMD’s market share gain potential”.
Earlier this month, Marvell Technology (MRVL) shares hit a fresh record high after the chipmaker said demand for its custom AI processors would lift revenues in that key segment past $1.5 billion this year.
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Broadcom (AVGO) , one of the market’s star performers this year, has seen a huge surge in demand for its specialized networking chips.
The group also makes what are known as ASIC chips, which help hyperscalers — the large providers of cloud services and infrastructure — move large amounts of data through integrated circuits and ultimately accelerate the speed and reliability with which they process information.
AMD, like its U.S.-based rivals, is also facing the prospect of slumping China sales as trade restrictions between Washington and Beijing continue to escalate.
China-U.S. trade tensions
Earlier this month, in fact, China banned the exports of key rare minerals used in high-tech manufacturing, while the China Association of Communication Enterprises, an industry group, said U.S. chip supplies were “no longer safe” and prompted companies to source from domestic producers.
Related: Nvidia, AMD risks rise as U.S.-China chip war heats up
Arya also noted the potential for a correction in AMD’s client segment, which includes personal computing chip sales, following big gains over the second half of this year.
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“On the positive side, we continue to admire AMD’s consistent execution, benefits from rival Intel’s ongoing turmoil and AMD’s participation in the fast-growing AI market that can help sustain a 15-20% topline growth trajectory,” he added.
Advanced Micro Devices shares were marked 2.1% lower in premarket trading to indicate an opening bell price of $135.70 each, a move that would extend the stock’s six month decline to around 15.4%.
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