Bank of America lowers AMD stock rating, citing Nvidia AI dominance and declining PC demand

[midian182]

What just happened? AMD has spent most of this year taking advantage of Intel's struggles, but Team Red was dealt a blow yesterday when Bank of America downgraded its stock from Buy to Neutral. BofA Securities cited risks including competition in an AI chip industry dominated by Nvidia, as well as weakening PC sales. The company's share price is now down almost 10% compared to one week ago.

Bank of America analysts wrote that in addition to the competitive risks against Nvidia in the AI market, cloud customers are showing a growing preference for custom chips from Marvell Technology and Broadcom, which is limiting AMD's potential to gain market share.

It was also noted that AMD's largest cloud customer, Amazon, has indicated its preference for alternative custom products, which again could restrict AMD's market share in the AI accelerator industry.

"AMD's pipeline remains 1 year-plus behind Nvidia's (which is accelerating) and lacks a competitive networking (switching, optics) portfolio," said BofA analyst Vivek Arya. "Longer term, we continue to see Nvidia at 80%-plus accelerator share, custom chips at 10-15%, with the remaining shared by AMD and a range of startups."

AMD's share price over the past six months

Arya also warned that there could be a PC market correction in the first half of 2025, which might impact AMD. According to Gartner, worldwide PC shipments in the third quarter of 2024 totaled 62.9 million units, a 1.3% decline from the same period in 2023. But Gartner believes PC demand will see more robust growth in 2025, when the PC refresh will be at its peak.

Arya lowered his rating on AMD stock and cut his price target to $155 from $180. Sales and earnings estimates for the company were also reduced. The 2025 GPU revenue estimates were cut significantly, to $8 billion from $8.9 billion, far below the consensus estimate of $9.6 billion.

Source: App Economy Insights

The analyst did have some good news for AMD. He noted that Lisa Su's firm could take advantage of the struggles at Intel, which recently ousted Pat Gelsinger. It's something we're already seeing. During the recent Black Friday event, almost 90% of the motherboards sold by German retailer Mindfactory came from AMD, which is also dominating the US Amazon sales charts for both CPUs and mobos. Moreover, the most recent Steam survey shows AMD has climbed to its highest-ever user share in the CPU category, reaching almost 36%.

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Bank of America lowers AMD stock rating, citing Nvidia AI dominance and declining PC demand

 

[gamerk2]

I remember buying AMD back when they were $1.70. I sold at $15, figuring they topped out.

Whoops.

 

[Puiu]

I remember buying AMD back when they were $1.70. I sold at $15, figuring they topped out.

Whoops.

buy the dip!

 

[letsgoiowa]

Really worried they'll cut Radeon because they have no more margin to lower prices. Nvidia has completely won and achieved total monopoly. If I were CEO, I would probably cut Radeon unless I could get antitrust involved.

 

[VariableSpike]

Really worried they'll cut Radeon because they have no more margin to lower prices. Nvidia has completely won and achieved total monopoly. If I were CEO, I would probably cut Radeon unless I could get antitrust involved.

You just wait for the AI bubble to burst and for Nvidia to have to focus on a wider scope from a less dominant position, the problem is investors are impatient and want changes done yesterday in the name of profit and their dividends, even if it might hurt the business in the long run

 

[DanteSmith]

What does it matter if the PC market is falling when the competition is out of the game?

 

[godrilla]

buy the dip!

Crazy last week my inbox was full of hedge funds pushing and hyping AMD stock. They probably sold high and will buy on the dip. Fackers!

 

[BabaYaga]

AMD quietly exited the Radeon GPU business. No high end for 2025 and then you're going to be gaming on a compute-centered GPU that they just rebranded to UDNA to make it seem like they still care.

With a 3% operating margin, they can't even lower prices. People need to grasp reality. 5090 will be the only true GPU upgrade. Rest is a refresh that won't see any major gains. Similar to Super refresh for 4000 series.

Get ready for a $2.5k 5090. That's what I would do if I was Nvidia. Since nothing can handle UE5 at 4k, this is going to be a year of medium settings for 4k monitor owners unless you can scrape up for a 5090.

 

[BabaYaga]

That visual representation either did a horrible job of picking colors or tried to hide the negatives. On the right negatives are color coded red but on the left red is just another color. Coincidently Radeon which is represented in red is negative but also Xilinx is blue but also negative. They should have either stuck to negative red on the left side as well or not use red at all. Highlight the negatives better.

Segment Summary

Record Data Center segment revenue of $3.5 billion was up 122% year-over-year and 25% sequentially primarily driven by the strong ramp of AMD Instinct™ GPU shipments and growth in AMD EPYC™ CPU sales.
Client segment revenue was $1.9 billion, up 29% year-over-year and 26% sequentially primarily driven by strong demand for “Zen 5” AMD Ryzen™ processors.
Gaming segment revenue was $462 million, down 69% year-over-year and 29% sequentially primarily due to a decrease in semi-custom revenue.
Embedded segment revenue was $927 million, down 25% year-over-year as customers normalized their inventory levels. On a sequential basis, revenue increased 8% as demand improved in several end markets.

 

[Theinsanegamer]

I remember buying AMD back when they were $1.70. I sold at $15, figuring they topped out.

Whoops.

I did similar. Bought in at $9 and sold at $50. That paid for a new gaming PC, so not all was lost....

Should have waited for another couple years and sold it at $100 instead and gotten a 7900xtx instead of a 6800xt.

Really worried they'll cut Radeon because they have no more margin to lower prices. Nvidia has completely won and achieved total monopoly. If I were CEO, I would probably cut Radeon unless I could get antitrust involved.

They won't cut Radeon, all their igpus use Radeon tech, so may as well make a few dGPUs as well.

 

[yRaz]

AMD quietly exited the Radeon GPU business. No high end for 2025 and then you're going to be gaming on a compute-centered GPU that they just rebranded to UDNA to make it seem like they still care.

With a 3% operating margin, they can't even lower prices. People need to grasp reality. 5090 will be the only true GPU upgrade. Rest is a refresh that won't see any major gains. Similar to Super refresh for 4000 series.

Get ready for a $2.5k 5090. That's what I would do if I was Nvidia. Since nothing can handle UE5 at 4k, this is going to be a year of medium settings for 4k monitor owners unless you can scrape up for a 5090.

Get ready for 1% of the market to upgrade to a 5090 while telling everyone else AMD is failing for not making products targeted at 1% of the market.

 

[Lionvibez]

Get ready for 1% of the market to upgrade to a 5090 while telling everyone else AMD is failing for not making products targeted at 1% of the market.

this majority of the market is low to mid tier gpu's

I don't know many people that will sell a kidney to buy a 5090.

 

[Felusy]

All AMD has to focus on is to get FSR and FSR Native to DLSS/DLAA level, with same availability in games.
People are mostly buying RTX cards because of DLSS, not because of RT. Most Nvidia users don't care at all for RT, including myself. DLSS is in like 600+ games now, and pretty much all new and demanding ones have it. I use DLAA whenever I can. All "DLSS Games" can get DLAA using DLSS Tweaks.

DLSS/DLAA is simply the superior way for most people to experience new games. DLAA for best visuals. DLSS for a performance bump while still providing top visuals with AA and sharpening applied. Beats Native + TAA in most/all games. TAA is generally terrible. I like SMAA better but DLSS beats it too in most games.

Even at 4K/UHD you need AA and DLSS/DLAA/FSR have built in AA and sharpening. This is why DLSS/FSR is the default AA option in many new games now.

1440p with DLAA looks better than 2160p NoAA.

Hopefully Radeon 8000 is going to be a succes so they can regrab some marketshare. I only see AMD compete with 5070 series tops this time tho.

With UDNA in 2026, hopefully they will enter high-end again.

 

[poohbear]

Lisa Su said she's gearing up AMD to focus on AI. I believe her.

She definitely has the credentials to turn AMD around.