With HSBC cautioning that AMD’s “AI GPU roadmap is less competitive than we previously thought,” the company downgrades its stock.
According to a newly cautious analyst, Advanced Micro Devices Inc. may encounter additional obstacles this year in its efforts to make significant headway in the Nvidia Corp.-dominated artificial intelligence chip industry.
Frank Lee of HSBC took a more pessimistic view of AMD’s stock (AMD) on Wednesday, cautioning that the company’s momentum in AI graphics processing units may be muted following a dismal run last year that resulted in an 18% drop in AMD shares over 2024. During the same time period, Nvidia’s stock (NVDA) increased 171%.
With a price target of $110, Lee’s new “reduce” rating is over 14% lower than AMD’s closing price on Tuesday. Wednesday’s session saw a 4.5% decline in the stock.
“We see additional downside as we now believe its AI GPU roadmap is less competitive than we previously thought,” Lee stated about AMD. “Hence, we believe AMD wouldn’t be able to penetrate the AI GPU market as much as we had earlier anticipated.”
He specifically mentioned AMD’s new MI325 GPU’s “lukewarm demand” and suggested that supplier problems might result in the MI325’s high-bandwidth memory specs being lower.
Furthermore, Lee stated that AMD is “unlikely to have an AI rack solution to compete with Nvidia’s NVL rack platform until late 2025 or early 2026 when we expect its MI400 launch,” despite the fact that the company is anticipated to release the MI350 in the second part of this year.
Marvell Technology Inc. (MRVL) and Broadcom Inc. (AVGO), two manufacturers of application-specific integrated circuits that compete with GPUs in the AI sector, may also put extra pressure on the market. According to Lee, investors became increasingly irate with AMD’s strategy as those businesses hinted at significant growth prospects towards the end of last year.
Lee stated, “We now believe AMD will not only face challenges in trying to narrow is AI GPU roadmap with Nvidia, but also some potential long-term competition from AWS’s ASIC supply chain,” alluding to Amazon Web Services.
Although AMD’s operations encompass more than simply artificial intelligence, Lee is skeptical that the company’s non-AI divisions will soon provide a significant boost. As an example, he noted that AMD’s client business might increase 12% this year, which is greater than the rate for the personal computer market as a whole but much slower than the 44% clip observed in 2024.
Due to “muted overall server-industry growth,” he also lowered his growth projections for AMD’s traditional server business, despite the fact that AMD still has room to gain market share in that sector.
