Advanced Micro Devices (AMD) stock has declined 13.3% so far this year and plunged more than 40% over the past year, as investors and analysts wait for the semiconductor company’s AI (artificial intelligence) growth story to materialize. AMD reported better-than-expected revenue and earnings for Q4 2024, but its data center segment, which includes advanced AI chips, failed to impress with its 69% revenue growth. Moreover, a weak first-half outlook for the data center segment further weighed on investor sentiment.
AMD’s data center revenue jumped 94% to $12.6 billion in the full year 2024, fueled by the demand for AMD Instinct and EPYC processors. However, this growth dwarfs rival Nvidia’s (NVDA) performance, which generated a 142% rise in its data center revenue to $115.2 billion in the comparable full year.
Analysts Seek More Visibility on AI Tailwinds
Recently, Goldman Sachs analyst Toshiya Hari reiterated a Hold rating on AMD stock but lowered the price target to $125 from $129. The five-star analyst stated that while the company posted upbeat Q4 earnings and continues to gain market share in the Client and Server CPU space, investors were disappointed with the data center unit’s outlook.
Hari added that AMD’s guidance was in contrast to the constructive commentary on AI capital spending by tech giants like Microsoft (MSFT), Meta Platforms (META), and Alphabet (GOOGL). The analyst remains on the sidelines as he looks for signs of a re-acceleration in AMD’s growth before turning more constructive on the stock.
Recently, Daiwa analyst Louis Miscioscia revised the rating on AMD stock to Outperform from Buy but slashed his price target to $130 from $170, citing a weaker-than-expected Q1 2025 outlook. The analyst said that the material disappointment in GPU sales is holding AMD stock back from scoring an “AI premium.” Miscioscia noted that the weaker-than-anticipated performance in GPUs seems to be related to a slower-than-expected ramp in MI325 GPUs. Nonetheless, he expects a strong second half, as the MI350 GPU adoption picks pace.
Likewise, TD Cowen analyst Joshua Buchalter lowered his price target for AMD stock to $135 from $150 and reaffirmed a Buy rating. The analyst thinks that the “AI Story Will Need to Be Proven.” Buchalter contends that while currently AMD’s data center GPU upside seems to be a show-me story, he expects it to eventually prove out. He believes that given the progress in building its software ecosystem and the large AI compute TAM (total addressable market), AMD is on the right track to strengthen its position and emerge as “the de facto merchant alternative to NVIDIA’s leadership position.”
Is AMD Stock a Buy, Sell, or Hold?
Overall, Wall Street is cautiously optimistic on Advanced Micro Devices stock, with a Moderate Buy consensus rating based on 25 Buys, 11 Holds, and one Sell recommendation. The average AMD stock price target of $147.88 implies 41.2% upside potential.
