AMD's stock gets a downgrade, with HSBC warning that the company's 'AI GPU roadmap is less competitive than we previously thought'
Advanced Micro Devices Inc.'s attempts to gain meaningful inroads into the artificial-intelligence chip market dominated by Nvidia Corp. could hit more snags this year, according to a newly cautious analyst.
HSBC's Frank Lee moved to a bearish stance on AMD's stock (AMD) on Wednesday, warning that the company's momentum in AI graphics processing units could remain muted after a disappointing stretch last year that translated to an 18% decline for AMD shares over the course of 2024. Nvidia's stock (NVDA) was up 171% over the same span.
Lee's new "reduce" rating comes with a $110 price target that's nearly 14% below AMD's Tuesday closing price. The stock was down 4.5% in Wednesday's session.
"We see additional downside as we now believe its AI GPU roadmap is less competitive than we previously thought," Lee wrote of AMD. "Hence, we believe AMD wouldn't be able to penetrate the AI GPU market as much as we had earlier anticipated."
Read: Nvidia's stock falls further - but analysts see a future that's brighter than ever
In particular, he pointed to "lukewarm demand" for AMD's new MI325 GPU and said that the high-bandwidth memory specifications in the MI325 could be lower due to supplier issues.
Additionally, though AMD is expected to come out with the MI350 in the second half of this year, the company is "unlikely to have an AI rack solution to compete with Nvidia's NVL rack platform until late 2025 or early 2026 when we expect its MI400 launch," Lee wrote.
There's also the potential for more competitive pressure from Marvell Technology Inc. (MRVL) and Broadcom Inc. (AVGO), two makers of application-specific integrated circuits that are an alternative to GPUs in the AI market. As those companies teased big growth opportunities late last year, Lee said investors got more sour on AMD's positioning.
"We now believe AMD will not only face challenges in trying to narrow is AI GPU roadmap with Nvidia, but also some potential long-term competition from AWS's ASIC supply chain," Lee wrote, referring to Amazon Web Services.
AMD's business is about more than just AI, but Lee doubts the non-AI areas will contribute to a substantial positive surprise for the company in the near future. For instance, AMD's client business could grow 12% this year, he wrote - a rate faster than that for the overall personal-computer market but well slower than the 44% clip seen in 2024.
He also cut his growth expectations for AMD's traditional server business owing to "muted overall server-industry growth," even though AMD still stands to pick up market share in that area.
See also: Quantum-computing stocks sink as Nvidia CEO delivers a reality check
-Emily Bary
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