Advanced Micro Devices (AMD), the stock of which Goldman Sachs, HSBC and other firms have downgraded in recent days, received a new downgrade on Thursday.
Wolfe Research analyst Chris Caso has downgraded AMD’s stock from Buy to Perform at Par on Thursday.
Caso also reduced his rating on AMD and removed his $210 target price.
Following the earnings report of Taiwan Semiconductor Manufacturing on Thursday, shares of semiconductor manufacturers like Nvidia and Marvell Technology as well as Applied Materials rose.
AMD’s stock, however, lagged behind, with a 0.1% drop to $119.83 during morning trading.
ICD examines why analysts are losing faith in the stock and a possible silver lining
AMD’s revenue from data-center GPUs is below expectations
Wolfe Research has downgraded AMD following a reduction in its first-quarter revenue forecast and earnings expectations.
The firm expects to earn 80 cents a share and $6.6 billion of revenue, down from $7.04 and 93 cents a share.
The revised figures are below the Wall Street consensus of $7.04 Billion and 95 Cents per Share.
The downgrades stem from weaker-than-anticipated data-center GPU revenue, a critical component of AMD’s product line for AI workloads.
Wolfe Research has highlighted that AMD’s GPU business in data centers is “running under expectations”.
The firm also slashed the estimate of its full-year revenues to $29.9 Billion, a sharp decline from its previous projections of $33.6 Billion, citing a slow seasonality in PC sales, gaming revenue weakness and competitive pressures.
Caso said that other challenges include slow seasonality in personal computers after a strong fourth-quarter and continued weakness of gaming revenue.
AMD stock: increasing competition in AI and custom processors
Goldman Sachs has lowered its AMD rating to “Neutral” from “Buy”, and reduced its price target to $125 from $175.
Analyst Toshiya hari expressed concern about the rising competition in accelerated computation and the increasing adoption of Arm-based CPUs that could disrupt AMD’s growth.
Goldman Sachs said that while AMD has made progress in taking market shares from Intel in x86 based computing, the company faces increasing difficulties in maintaining its momentum.
AMD’s operating costs are also expected to increase, which could put pressure on profit margins.
Goldman Sachs noted that AMD’s shares have risen by 50% since they added it to their Buy list in November 2020.
This performance is still behind the S&P 500, which has increased by 72% over the same period.
Hari said that this is because AMD’s growth in data center GPUs has been slower and less than expected, further dampening the optimism about its position in AI.
AMD’s AI chip road map ‘less competitive
HSBC has delivered a double downgrade. It has lowered AMD’s rating from Buy to Reduce and reduced its price target from $200 to $110.
The company expressed concern about AMD’s AI chips roadmap, claiming that it was “less competitive” than originally expected.
HSBC analysts noted a weaker demand for AMD’s MI325 GPU, and questioned whether its upcoming MI350 chip could compete effectively with Nvidia’s dominant AI offerings.
HSBC has also reduced its fiscal 2020 AI GPU revenue forecasts for AMD from $12.3 to $8.1 billion. This is well below the consensus estimate, which was $9.5 billion.
Analysts warned that AMD shares could continue to fall, as they have already lost 24% in the last three months.
The MI350 chip series may act as a catalyst for AMD
There is optimism about AMD’s future. Analyst Caso said that the MI350 chip series set to launch in second half of this year could act as a catalyst for AMD.
The MI350 will feature a significant redesign and upgrades, unlike the MI325, which is primarily focused on increasing memory capacity.
Dell Technologies announced recently that it will be integrating AMD processors for the first time into its corporate-targeted computer models.
Caso pointed out that this move, which was previously limited to Dell’s consumer PC line, signals potential gains for AMD in client computing.
This post AMD faces downgrades from analysts: Could the MI350 chip series increase stock performance? This post may be updated as new information unfolds
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