Advanced Micro Devices (NASDAQ:AMD) has faced a wave of downward revisions lately, as many on Wall Street now believe its data center GPU revenue opportunity is not as big as previously thought. Now, another analyst has joined the growing list of AMD skeptics, citing that exact reason as to why the outlook appears less favorable for the chip giant.
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Wolfe Research’s Chris Caso, an analyst ranked in the top 1% of Wall Street stock pros, says the datacenter GPU business is “running below expectations.”
Following a recent visit to Asia, Caso believes the setup for AMD heading into Q4 earnings appears challenging. ODM build plans indicate only “modest quarterly growth” for the year, based on 4Q24 run rates. The 5-star analyst forecasts datacenter GPU revenue will fall within the $1.5–2.0 billion range in 4Q24 and reach ~$7 billion in 2025, significantly below buyside expectations of around $10 billion and Caso’s prior projection of $10.8 billion. Caso anticipates datacenter GPU revenue of $1.75 billion in 1Q25, with flat quarterly growth expected for the remainder of the year.
But that’s not where the bad news ends. Slow PC seasonality is anticipated to follow a strong Q4, with Caso expecting client revenue to decline 17% sequentially in Q1. Ongoing weakness in gaming (-20% quarter-over-quarter) and a lack of recovery in embedded (FPGA) markets are also likely. Any recovery in the embedded segment is more likely in the second half of the year rather than in 1H.
Numbers-wise, for Q4, Caso has revenue/adj. EPS the same as the midpoint of the guide at $7.5 billion/$1.06, respectively, compared to the Street at $7.52 billion/$1.08.
Meanwhile, accounting for lower DC GPU revenue, the analyst’s Q1 estimates have gone from $7.04 billion/$0.93 to $6.60 billion/$0.80, both below consensus at $7.04 billion/$0.95. Caso’s CY25 estimates have also been reduced to $29.9 billion/$4.19 from the prior $33.6 billion/$5.33. The Street has $32.3 billion/$5.02.
That said, it’s not all doom and gloom. Some respite is anticipated deeper into the year.
“We do expect the MI350 series to be a more significant catalyst for AMD when it launches in 2H25, with some optimism for CY26,” the analyst explained. “The MI350 is expected to be a more significant redesign/upgrade than the MI325, which predominantly increases memory loading.”
However, that is not enough to stop a downgrade, with Caso changing his AMD rating from Outperform (i.e., Buy) to Peer Perform (i.e., Neutral) while also taking his prior $210 price target off the table. (To view Caso’s track record, click here)
Joining Caso on the fence, 9 other analysts now hold Neutral ratings on AMD. Combined with 21 Buy recommendations and a single Sell, the consensus is that AMD stock is a Moderate Buy. The average price target stands at $173.28, suggesting the shares could gain 42% in the months ahead. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
