Goldman Sachs analysts revisit AMD stock price targets as downturn continues

Advanced Micro Devices shares fell again on Friday after one of Wall Street’s top analysts revised price targets and ratings, in part because of new challenges the artificial intelligence chip maker faces in 2025.

AMD (AMD) Although it currently lags far behind Nvidia NVDA globally in terms of artificial intelligence chips and processors, it also sees new and accelerating challenges facing the personal computer and server markets.

SoftBank’s Arm Holdings, which lists in a $5 billion IPO in late 2023 valuing the group at about $55 billion, collects licensing fees from its chip designs and further royalties from individual sales.

It also captures a larger share of the global PC market, AMD’s secondary unit focused on the data center space, which CEO Rene Haas predicts will be 20% of the Windows PC market by 2029. will reach 50%.

Goldman Sachs analyst Toshiya Hari noted the group’s recent developments in a note that downgraded AMD’s rating and price target when it releases its fourth-quarter earnings report later this month.

AMD stock price underperforms

Hari added the stock to his “buy” list in November 2020, noting that the stock underperformed the S&P 500 during that time, compared with the benchmark index’s 72% gain. It’s up 50%.

The stock has also been weak of late, down more than 33% in the past six months, well below the PHLX Semiconductor Industry Benchmark’s 9.4% decline, and has lost about $650 million in market value since the recent disappointing sales and profit outlook. billion in October.

Related: Analysts slash AMD stock price targets as gap with Nvidia widens

“While we remain constructive on AMD’s ability to capture share from Intel in x86-based computing on PCs and traditional servers, we are increasingly concerned [over] The rise of custom Arm-based CPUs and increased competition in accelerated computing,” Hari and his team wrote.

Hari said Arm’s rise will affect its revenue growth prospects, increase operating expenses and affect the stock’s price-to-earnings ratio.

He downgraded the stock to “neutral” from “buy” and cut the group’s price target by $46 to $129 per share.

AMD needs to regain market confidence

“We believe the underperformance was due to weaker PC and traditional terminal demand, as well as lower-than-expected growth in data center GPUs,” Hari said. “We now expect the stock to remain range-bound until the market reacts favorably to AMD’s future growth and profits.” Trajectory restores confidence.

AMD is scheduled to announce fourth-quarter earnings on January 28, and told investors in October that MI300 sales could rise to more than $5 billion this year, with total revenue of about $7.5 billion.

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Analysts expected earnings of $1.08 per share, data center revenue of $4.15 billion, customer revenue of $1.95 billion, and gaming and embedded revenue totaling about $1.4 billion.

AMD shares fell 1.92% in pre-market trading, opening at $119.50 per share.

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