Semiconductor company Advanced Micro Devices (AMD) faces headwinds due to lackluster demand for its artificial intelligence (AI) chips. That’s a blow to AMD investors, who were hoping the company would ride the AI chip wave alongside rival Nvidia (NVDA).
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Instead, AMD stock has consistently faced pressure throughout 2024. That includes a 5.57% drop on Monday after Bank of America analyst Vivek Arya, a five-star analyst according to Tipranks’ ratings, downgraded the company to a Neutral rating from a Buy rating. He also cut the firm’s price target for AMD shares to $155 from $180. Amazon (AMZN) reporting soft demand for AMD AI chips is partially behind the downgrade and price target cut.
Unfortunately for AMD investors, the company looks like it will close out 2024 in the red, as the stock is down 11.22% year-to-date. There’s also no major news coming from it between now and the end of the year. Investors will have to wait until February 2025 for its Q4 2024 report and additional insight into its operations this year.
Why Can’t AMD Keep Up with NVDA?
To be frank, Nvidia beat AMD to the punch with its AI chips, securing it a strong position as the market leader. It’s also well ahead of AMD offerings and support, showing that AMD wasn’t as prepared for the AI boom as NVDA was.
This doesn’t mean AMD is completely out of the race. The company still has several major customers using its AI chips. While Amazon doesn’t see the demand for AMD’s AI chips that investors hoped for, Meta Platforms (META) and Microsoft (MSFT) use the company’s offerings. ChatGPT owner OpenAI has also confirmed that it uses some of the chips in its data centers.
Is AMD Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for Advanced Micro Devices is Moderate Buy based on 22 Buy and eight Hold ratings over the last three months. With that comes an average price target of $184.33, a high of $220, and a low of $150. This represents a potential upside of 40.85% for AMD shares.
