Advanced Micro Devices (NASDAQ:AMD) would possibly seem to be a first-rate AI beneficiary, however the inventory’s efficiency this yr tells a special story. While the broader market has been on the rise, shares of the chip big have moved in the wrong way, sliding 10% for the reason that begin of the yr.
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But for these considering there’s a possibility brewing right here, Bank of America analyst Vivek Arya has simply poured chilly water on that notion.
Ranked among the many high 2% of Wall Street inventory specialists, Arya has revised his CY25E AI GPU income forecast for AMD, chopping it from $8.9 billion to $8 billion – properly beneath the Street’s consensus of $9.6 billion. This revision implies AMD will preserve its ~4% share of the accelerator market, down from Arya’s earlier projection of a 100 foundation level acquire to a 5% share of a $200 billion+ CY25 accelerator complete addressable market.
“While our forecast implies a strong 54% YoY progress, the restricted alternative to exceed greater road expectations may proceed to be an overhang on AMD inventory, a lot we noticed in the course of the previous yr,” the 5-star analyst mentioned.
The drawback is that AMD’s pipeline lags behind AI chip king Nvidia’s (NASDAQ:NVDA) by over a yr, as Nvidia’s roadmap continues to maneuver ahead at a quick tempo. Additionally, AMD has no aggressive networking portfolio.
Moreover, AMD faces headwinds from its largest cloud buyer, Amazon. The e-commerce big has signaled a choice for various customized options like its personal Trainium (developed with Marvell) and Nvidia merchandise, whereas exhibiting restricted demand for AMD choices.
Meanwhile, Google continues to prioritize inner options like its customized TPU (the place it has partnered with Broadcom) and merchandise from Nvidia, too. AMD has gained a foothold with prospects like Microsoft, Meta, and Oracle. However, the upcoming CapEx calls for for Nvidia’s next-generation structure, Blackwell, may restrict AMD’s capacity to seize further market share as key gamers might allocate budgets to Nvidia merchandise. Over the long run, Arya expects Nvidia will retain over 80% of the AI accelerator market, with 10-15% taken by customized chips, and the rest shared between AMD and numerous startups.
Arya does admit his new thesis may very well be unsuitable. For occasion, AMD is well-positioned within the “extremely engaging” compute market, the place it has the chance to increase its share of the PC/server section from ~23% proper now as struggles proceed at section chief Intel (which instructions a 69% share). Additionally, Nvidia’s AI chip provide constraints and premium pricing might enable AMD to strengthen its place as a “sturdy service provider GPU various, particularly for inner cloud workloads.”
Nevertheless, Arya has simply downgraded his AMD score from Buy to Neutral, and has decreased his value goal from $180 to $155. Still, there’s a possible upside of 18% from present ranges. (To watch Arya’s monitor file, click on right here)
While 7 different analysts be a part of Arya on the fence, with a further 22 Buys, AMD inventory claims a Moderate Buy consensus score. At $185.46, the common value goal gives a one-year upside of ~42%. (See AMD inventory forecast)
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Disclaimer: The opinions expressed on this article are solely these of the featured analyst. The content material is meant for use for informational functions solely. It is essential to do your individual evaluation earlier than making any funding.
