Advanced Micro Devices (AMD), a prominent player in the semiconductor industry, is facing significant headwinds as it navigates the increasingly competitive landscape of artificial intelligence (AI) technologies. According to HSBC, the stock’s prognosis has taken a downturn as the bank has recalibrated its rating on AMD, moving it from a ‘buy’ to ‘reduce’ with a new price target set at $110 per share, reflecting a considerable drop from the previous target of $200. This shift indicates that HSBC anticipates a 13% decline from the stock’s recent closing price. An important element of this analysis is the mounting rivalry in the GPU market; major competitors like Nvidia, Marvell, and Broadcom are ramping up pressure on AMD’s share of the AI graphics processing unit (GPU) market.
Frank Lee, the analyst at HSBC, highlighted that AMD’s positioning in the AI GPU arena may be less favorable than earlier projections suggested. As GPUs are foundational for AI applications, any weaknesses in AMD’s offerings could impair its ability to capture market share. A notable concern is the lukewarm reception of AMD’s new MI325 GPU, primarily due to issues with Samsung’s high-bandwidth memory (HBM3e) supply. This bottleneck could hinder AMD’s prospects, particularly as Lee suggests that momentum may falter in the first half of 2025. The implication is clear: if AMD cannot stay competitive with its AI GPU technology, it risks cementing a status of mediocrity among its peers.
Furthermore, the bleak forecast isn’t limited to AMD’s AI segment. Lee conveyed that the company’s growth outside of the AI niche is also poised for stagnation. Although he anticipates client revenue to grow 12% year-over-year in FY25, this projection is shrinking significantly compared to the extraordinary growth rate of 44% the company experienced in FY24. The context of overall growth in the PC market—a mere 4% increase in notebook unit sales—intensifies the stark contrast and suggests AMD may struggle to maintain its previous momentum.
In the wake of HSBC’s downgrade, AMD shares experienced a 2% drop, illustrating immediate investor concern. Interestingly, despite this pessimistic assessment from HSBC, a majority of analysts remain bullish about AMD’s long-term potential, with data from LSEG revealing that 43 out of 54 analysts maintain a ‘buy’ or ‘strong buy’ rating. The average price target, indicating a 43% upside, reflects a belief in AMD’s underlying fundamentals despite current challenges.
While AMD has historically been a power player in the semiconductor market, recent insights from HSBC spotlight critical vulnerabilities, particularly in the AI GPU sector. The road ahead appears bumpy, not only due to fierce competition from formidable companies but also due to AMD’s own potential missteps. Investors must weigh these complexities as they consider AMD’s place in the evolving tech landscape, recognizing that while optimism persists among many analysts, the nuances of competition and market demand cannot be ignored.