Advanced Micro Devices (NASDAQ:AMD) might seem like a prime AI beneficiary, but the stock’s performance this year tells a different story. While the broader market has been on the rise, shares of the chip giant have moved in the opposite direction, sliding 10% since the start of the year.
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But for those thinking there’s an opportunity brewing here, Bank of America analyst Vivek Arya has just poured cold water on that notion.
Ranked among the top 2% of Wall Street stock experts, Arya has revised his CY25E AI GPU revenue forecast for AMD, cutting it from $8.9 billion to $8 billion – well below the Street’s consensus of $9.6 billion. This revision implies AMD will maintain its ~4% share of the accelerator market, down from Arya’s earlier projection of a 100 basis point gain to a 5% share of a $200 billion+ CY25 accelerator total addressable market.
“While our forecast implies a solid 54% YoY growth, the limited opportunity to exceed higher street expectations could continue to be an overhang on AMD stock, much we saw during the past year,” the 5-star analyst said.
The problem is that AMD’s pipeline lags behind AI chip king Nvidia’s (NASDAQ:NVDA) by over a year, as Nvidia’s roadmap continues to move forward at a fast pace. Additionally, AMD has no competitive networking portfolio.
Moreover, AMD faces headwinds from its largest cloud customer, Amazon. The e-commerce giant has signaled a preference for alternative custom solutions like its own Trainium (developed with Marvell) and Nvidia products, while showing limited demand for AMD offerings.
Meanwhile, Google continues to prioritize internal solutions like its custom TPU (where it has partnered with Broadcom) and products from Nvidia, too. AMD has gained a foothold with customers like Microsoft, Meta, and Oracle. However, the upcoming CapEx demands for Nvidia’s next-generation architecture, Blackwell, could limit AMD’s ability to capture additional market share as key players may allocate budgets to Nvidia products. Over the long term, Arya expects Nvidia will retain over 80% of the AI accelerator market, with 10-15% taken by custom chips, and the remainder shared between AMD and various startups.
Arya does admit his new thesis could be wrong. For instance, AMD is well-positioned in the “highly attractive” compute market, where it has the opportunity to expand its share of the PC/server segment from ~23% right now as struggles continue at segment leader Intel (which commands a 69% share). Additionally, Nvidia’s AI chip supply constraints and premium pricing may allow AMD to strengthen its position as a “strong merchant GPU alternative, especially for internal cloud workloads.”
Nevertheless, Arya has just downgraded his AMD rating from Buy to Neutral, and has reduced his price objective from $180 to $155. Still, there’s a potential upside of 18% from current levels. (To watch Arya’s track record, click here)
While 7 other analysts join Arya on the fence, with an additional 22 Buys, AMD stock claims a Moderate Buy consensus rating. At $185.46, the average price target offers a one-year upside of ~42%. (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.
