Advanced Micro Devices (NASDAQ: AMD) shares plunged 5.6% to $130.87 on Monday after Bank of America downgraded the company and cut its price target.
Wall Street analyst Vivek Arya lowered the chipmaker to Hold from Buy, and slashed the company’s price target from US$180 (A$280) to $155, amid concerns over competition.
In the report the analyst warned about risks in the AI chip market and weakness in the personal computer (PC) market.
Specifically, AMD has been competing with AI-darling Nvidia, which has a $3.5 trillion market cap, compared to AMD’s $224.9 billion market cap, which is indeed a tough race to win.
Most recent quarterly data also showed Nvidia posting revenue of $35.1 billion, compared with AMD’s $6.8 billion.
"Recently largest cloud customer Amazon strongly indicated its preference for alternative custom (Trainium/ MRVL) and NVDA products, but a lack of strong demand for AMD," Arya said in his research note to clients.
“Separately Google continues to prefer internal (TPU/ AVGO) and NVDA.”
Despite Arya saying that AMD does have a strong presence at Microsoft, Meta Platforms, and Oracle, he thinks those companies' plans to heavily invest in Nvidia's new Blackwell chip, could impact future opportunities for Advanced Micro Devices.
Also called out in the research note was the potential drop in demand for PC processors in the first half of 2025, after Arya said AMD’s growth with PC processors is not sustainable.
According to TipRanks data, Vivek Arya has a success rate of 61% and a total average return of 18.7% over the past year.
AMD shares have come off 9.1% this year, compared with the 31% surge seen in the Nasdaq Composite.
Advanced Micro Devices (NASDAQ: AMD) closed at $130.87, down 5.57% on Monday with a market cap of $224.9 billion.