Advanced micro-devices (NASDAQ:AMD) investors, get ready. HSBC just put the brakes on the chipmaker, downgrading the stock from Buy to Reduce and reducing its price target from $200 to $110, suggesting a bumpy road ahead. HSBC analyst Frank Lee didn’t hold back, highlighting AMD’s lackluster prospects in the red-hot AI GPU market. He highlighted low demand for AMD’s MI325 GPU and delays in catching up with Nvidia’s (NASDAQ:NVDA) market-dominating NVL rack platform. Lee also cut AMD’s AI GPU revenue forecast for fiscal 2025 by 34%, to $8.1 billion, a stark contrast to the consensus estimate of $9.5 billion. AMD’s stock price has undergone a 24% correction over the past three months, but we believe there is still downside risk, Lee said.
The pain doesn’t stop there. Outside of the AI space, AMD’s momentum appears fragile. Customer revenue growth is expected to slow to 12% year-over-year in fiscal 2025, a sharp decline from forecast growth of 44% for fiscal 2024. Center revenue Non-AI data growth is also disappointing, thanks to moderate growth in the server sector. Meanwhile, competitors from AMD, Nvidia, Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO) raise the temperature. Adding insult to injury, AMD’s next-generation GPU and rack AI solutions likely won’t make a splash until late 2025 or early 2026, further delaying the company’s ability to capture significant market share AI. Investors did not take the news lightly. AMD shares fell 4.3% this morning after the downgrade.
However, not everyone is leaving the ship. Data from S&P Global shows that most analysts are sticking to a buy rating on AMD, with an average price target of $180, a potential upside of 50% from current levels. Mizuho analysts remain optimistic, citing AMD’s untapped growth in AI GPUs and its well-positioned strategy. But others, like Bank of America Securities, are more cautious, pointing to the lag of AMD’s data center accelerators and the growing threat of custom silicon solutions. The main thing? AMD’s future may be bright, but in the short term, it’s a battleground title caught in a high-stakes game of catch-up.
This article first appeared on GuruFocus.