AMD stock slides as BofA cuts to Neutral on 2025 downside risks to expecations

Investing.comDec 9, 2024 1:33 PM

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Investing.com -- Bank of America downgraded Advanced Micro Devices (NASDAQ:AMD) to Neutral from Buy in a research note on Monday, citing downside risks to its 2025 outlook.

The firm lowered its price target for the stock to $155 from $180 and reduced its 2025/26 EPS estimates by 6% and 8%, respectively, reflecting a 13-23% gap versus consensus.

Two primary factors are said to be driving BofA’s cautious stance. First, the bank says competitive pressures in AI from NVIDIA (NASDAQ:NVDA) and custom chip providers like Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO) could limit AMD’s market share gains.

The bank noted, “Recently largest cloud customer, Amazon (NASDAQ:AMZN) strongly indicated its preference for alternative custom (Trainium/ MRVL) and NVDA products, but a lack of strong demand for AMD,” while other major cloud players such as Google (NASDAQ:GOOGL) have similar preferences.

BofA forecasts AMD maintaining just 4% of the $200 billion AI accelerator market in 2025, compared to NVIDIA’s commanding 80%+ share.

Second, a potential correction in the PC processor market during the first half of 2025 adds to concerns. After a significant 40% half-on-half surge in AMD’s client PC sales during late 2024, Bofa believes the market could experience a slowdown, challenging AMD’s growth momentum.

Despite these headwinds, BofA acknowledged AMD’s consistent execution and its ability to capitalize on Intel’s restructuring struggles, providing opportunities to expand its market share in PC and server CPUs.

The note also highlighted AMD’s strong presence with Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), and Oracle (NYSE:ORCL) as positives but flagged limited opportunities for the company to surpass Street estimates in the AI space.

While AMD remains well-positioned in the compute market, BofA believes expectations for 2025 could temper enthusiasm, leading to the downgrade.

Disclaimer: The information provided on this website is for educational and informational purposes only and should not be considered financial or investment advice.

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