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The initial trickle of cautiousness around AMD on Wall Street is increasingly turning into a near-consensus view, spurred by increased competition from Arm-based processors and a slower-than-expected growth trajectory for the company’s data center GPUs.
Goldman Sachs Downgrades $AMD to Neutral from Buy, Lowers PT to $129 from $175
Analyst comments: “Although we remain constructive on AMD’s ability to take share from Intel in x86-based compute across PCs and traditional servers, we are increasingly concerned that the rise of…
— Wall St Engine (@wallstengine) January 10, 2025
To wit, Goldman Sachs analyst Toshiya Hari has just penned a fresh note on AMD, adopting a markedly cautious tone in relation to the stock’s near-term prospects.
While Goldman Sachs remains “constructive on AMD’s ability to take share from Intel in x86-based compute across PCs and traditional servers,” it is “increasingly concerned” that the ongoing ingress of Arm-based custom CPUs would reduce the company’s stock multiple, “weigh on AMD’s revenue growth relative to peers, and exert upward pressure on AMD’s operating expenses.”
Elsewhere, Hari notes with concern AMD’s relative underperformance, one that has seen the stock notch gains of just around 50 percent since the 04th of November 2020 – when the stock was added to Goldman Sachs’ Buy List – while the S&P 500 has recorded gains of 72 percent over the same timeframe.
According to the analyst, “this underperformance stems from weakness in PC and traditional end-demand, as well as slower-than-expected growth in Data Center GPUs.”
Hari goes on to note:
“We now expect the stock to remain range-bound until the market regains confidence in AMD’s future growth and margin trajectory.”
As a result, Goldman Sachs has downgraded AMD to a neutral rating and lowered its price target for the stock from $175 to $129, implying minimal upside potential relative to AMD’s current stock price.
Of course, Goldman Sachs’ downgrade of the chipmaker comes within days of a similar action by HSBC. As we noted earlier this week, the iconic British bank has slashed its target for AMD’s share price by 45 percent to $110 from an earlier target of $200.
HSBC believes “AMD’s AI GPU roadmap is less competitive than previously anticipated, limiting its penetration into the AI GPU market.”
Wolfe Research noted in December 2024 that “AMD won’t be in a position to guide AI for CY25 – which will in itself drive concerns.”
Additionally, Bank of America (BofA) also recently flagged the rise of Arm-based vendors as a key concern for AMD’s CPU market share, especially as the penetration of Arm-based server CPUs reached 7 percent in Q3’24 “vs. <5% in 2023 and ~1% in 2022.”
