Advanced Micro Devices (AMD) experienced a decline in its stock price, dropping $1.36 or 1.14% to $118.60 in early trading on Thursday, following a downgrade by Wolfe Research. Analyst Chris Caso shifted the rating on AMD from ‘Outperform’ to ‘Peer Perform’, notably eliminating the previously set $210 price target. This downgrade was influenced by revised expectations for slower growth in data center GPU revenue.
Caso pointed to ODM build plans indicating only modest growth for AMD in 2025, leading to a significant adjustment in revenue forecasts for the data center segment. Wolfe Research has now projected data center GPU revenue for the fourth quarter of 2024 to be between $1.5 billion and $2 billion, with a full-year 2025 forecast of $7 billion. These figures fall considerably short of earlier expectations, which were set at $10.8 billion and aligned with buy-side predictions of around $10 billion.
Beyond the data center, Caso painted a cautious picture for other segments of AMD’s business. He highlighted ongoing weak demand for PCs, a softening in the gaming market, and no anticipated recovery in the embedded market through the first half of the year. These factors contribute to a broader concern about AMD’s near-term performance across multiple fronts.
However, amidst these challenges, there’s a silver lining with AMD’s upcoming MI350 AI accelerator, part of the Instinct series and built on the CDNA 4 architecture. Set to launch in 2025, the MI350 promises a 35-fold boost in AI inference performance compared to the previous MI300 series. Described as a significant redesign from the MI325, this new chip is expected to be a major catalyst for AMD. It could potentially reignite growth in a sector where AMD has been working to gain ground against competitors, particularly in the AI and high-performance computing markets.
The downgrade by Wolfe Research, while signaling immediate concerns about revenue and market demand, also underscores the strategic importance of AMD’s innovation in AI technology. The MI350 could serve as a pivotal product, not only for revenue but also for establishing AMD’s credibility and competitiveness in the rapidly expanding field of artificial intelligence. This scenario reflects the complex dynamics of the semiconductor industry, where short-term setbacks can coexist with long-term opportunities driven by technological advancements.
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