Advanced Micro Devices (NASDAQ:AMD) stock just can’t catch a break. Despite delivering a strong Q4 report and surpassing top-line expectations, investors shrugged it off, pushing the shares lower. This latest setback only adds to the stock’s woes, as it has been on the back foot for most of the past year.
Maximize Your Portfolio with Data Driven Insights:
- Leverage the power of TipRanks' Smart Score, a data-driven tool to help you uncover top performing stocks and make informed investment decisions.
- Monitor your stock picks and compare them to top Wall Street Analysts' recommendations with Your Smart Portfolio
The disappointment stemmed from the one metric that truly mattered – AI chip sales. While revenue in the Data Center segment, which houses AMD’s AI chips, climbed a strong 69% year-over-year, the growth rate slowed significantly from Q3’s 122% surge and fell short of analysts’ $4.14 billion target.
Making things worse, AMD did not provide AI GPU guidance for the full year with a flat first half of 2025 expected although the Lisa Su-led firm anticipates accelerated growth in the latter half driven by the MI350 rollout.
While investors wanted more from the outlook, Phillip Securities analyst Yik Ban Chong sees a positive in the Q1 guide. AMD expects first-quarter 2025 revenue of $7.1 billion, reflecting a 30% y/y increase – its biggest growth rate since a 70% surge in 2Q22. Chong attributes this momentum to strength in the data center and PC segments.
Additionally, in the PC segment, AMD continues to gain market share against Intel, notching a 52% y/y revenue increase in its Client PC division over the last twelve months. Q4 represented the third straight quarter of over 50% growth, driven by strong demand for its Zen 5 Ryzen 9000 processors and the ramp-up of the Ryzen AI 300 series. The company put the record desktop sell-through share in Q4 down to the “strong adoption” of new products and anticipates both unit shipments and ASPs (average selling prices) to rise in 2025.
However, in the near term, there are other developments that Chong finds concerning, especially regarding the data center business. Despite ramping up MI325 GPU production in Q4, as noted above, the company remained cautious in its outlook for the data center segment in the first half of the year and also failed to provide a specific guide for data center GPU revenue in 2025. This contrasts with its guidance of $5 billion for FY24, a target Ching points out it successfully met. And while the last twelve months data center revenue grew 94% y/y in Q4 – the strongest increase ever – Chong thinks there are signs it may be nearing a peak.
“We may have to wait for the MI350 GPU production ramp in the middle of 2025 before seeing more substantial growth in the data center segment,” the analyst went on to say.
To this end, Chong downgraded AMD shares from Buy to Accumulate (halfway between Neutral and Buy) while also lowering his price target from $170 to $120. The revised figure implies a ~12% upside from current levels. (To watch Chong’s track record, click here)
Looking at the broader analyst sentiment, AMD has received 35 ratings in the past three months. Among them, 22 analysts remain bullish with Buy calls, 12 take a more cautious stance with Hold ratings, and just 1 advises selling. This mix lands the stock a Moderate Buy consensus rating. Meanwhile, the average price target of $147.14 points to a potential ~37% gain over the next year. (See AMD stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
