An analyst at KeyBanc Capital Markets is concerned that Advanced Micro Devices Inc. would become embroiled in a pricing battle for PC processors.
This is one of the reasons John Vinh of KeyBanc cut AMD’s shares (AMD) from overweight to sector weight late Monday.
As S&P 500 futures increase, AMD’s stock is up 1.6% in premarket trading Tuesday, defying the downgrading thus far. In 2025, the stock has already dropped 31%.
Vinh is concerned that AMD’s profit margins may be impacted by a price war in the PC CPU market. According to his email to clients, “We believe AMD will be forced to react to [Intel’s] aggressive price actions in the range of 20-40% on Lunar Lake in order to maintain/regain lost market share” to Intel.
Given that AMD’s stock is trading at 13 times KeyBanc’s 2026 profit projections, it appears to be “relatively inexpensive”. “Semiconductor stocks rarely work with risk to [gross margins],” Vinh asserts.
While AMD has benefited from recent difficulties faced by Intel Corp. (INTC), Vinh believes that Intel’s 18A manufacturing technique will let it to “close the competitive gap with AMD.” He said that while AMD has a significant presence with cloud hyperscalers, “it will be increasingly more difficult for AMD to gain additional share,” particularly in the server business.
This year, he has downgraded AMD several times, and this is the most recent to do so in anticipation of a potentially more competitive Intel.
The Chinese market is another possible problem. Demand has been rising since AMD modified their AI accelerator to comply with China’s export regulations. But Vinh and his colleagues are “increasingly concerned whether this is sustainable given concerns that further export restrictions will be levied by the U.S.”
With its own Blackwell products, Nvidia Corp. (NVDA) “is so far ahead” in the field of artificial intelligence accelerators, according to Vinh. Vinh and his colleagues “think it will take some time for AMD to come out with a competitive response” to Nvidia, despite AMD’s successful acquisition of ZT Systems, an AI firm with experience in servers and clusters.
