Vivek Arya, a Bank of America Analyst warned of possible market share loss as he downgraded the shares of Advanced Micro Devices Inc. (NASDAQ: AMD), on Monday.
Now, he has given AMD stock a rating of “neutral”.
Artificial intelligence is widely viewed as being a major benefit for the multinational chipmaker.
Arya, however, isn’t convinced of its ability to capitalize on AI.
AMD’s shares have fallen about 35% from their high point for the year.
AMD Stock faces greater competitive risks
Vivek Arya has downgraded AMD’s shares due to the “increased competitive risk”.
He added that the Nasdaq listed firm would find it difficult to compete in the AI market against “best-of breed NVDA dominance”.
Arya, a BofA analyst, now predicts that AI chips will generate revenue of up to 8 billion dollars for Advanced Micro Devices by 2025. Arya’s previous prediction was for $8.9bn.
According to his estimate, the Californian company’s current share will be around 4.0% for the next year. AMD’s stock is also not attractive to income investors, as it does not pay out a dividend.
AMD’s share price could be affected by custom AI chips
Bank of America Securities has a more dovish outlook on Advanced Micro Devices, also due to cloud customers who have started to indicate a preference towards custom chips.
Amazon is the biggest cloud client and continues to prefer Nvidia’s products (Trainium/MRVL), as well as custom chips, over AMD.
Vivek Arya, a researcher, told clients that AMD could lose market share if NVDA Blackwell, NVDA’s high-end product, is not embraced by the company.
Analysts expect AMD to maintain its share of AI accelerators at around 5.0% in the future. He added that custom chips would own 10% to 15% of the market, while Nvidia continues to be dominant with a share over 80%.
AMD’s AI market share is slowing down
AMD shares have been struggling over the last month, despite reporting earnings that were in line with expectations for its third quarter.
Chipmaker Doubled Data Centre Sales in Q3. However, current quarter guidance only matches the overall revenue estimate.
Advanced Micro Devices is expecting its fourth-quarter sales to be around $7.5 billion, which equals a growth of 22% on an annualised basis. This is much less than other AI companies like Nvidia project for the future.
Nevertheless, the interest of customers and partners in MI325X remains high. Lisa Su, the chief executive of the company, said on the call with analysts that production shipments will begin this quarter.
AMD released the M325X in October, to compete with Nvidia Blackwell.
The post AMD could fail to achieve market share next year in AI: Find out more first appeared on ICD
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