Advanced Micro Devices (AMD) faced a significant setback on January 8th after HSBC downgraded the semiconductor stock from a "buy" to a "reduce" rating, citing increased competition in the artificial intelligence (AI) sector. HSBC analyst Frank Lee expressed concerns over AMD's AI GPU roadmap, which he believes is less competitive than previously thought. The downgrade was accompanied by a sharp reduction in the price target from $200 to $110, reflecting a potential 13% decline from the previous day's closing price. Lee highlighted the lukewarm demand for AMD's new MI325 GPU, attributing it to Samsung's difficulties in ramping up production of higher-spec HBM3e memory, which could limit the GPU's performance.
The downgrade comes amid a challenging environment for AMD, as it struggles to maintain its market position against dominant players like Nvidia and emerging competitors such as Marvell Technology. Despite unveiling new products at the Consumer Electronics Show (CES) 2025, AMD's absence of new GPU announcements has raised concerns about its ability to compete effectively in the AI space. HSBC's report also pointed to AMD's future offerings, including the MI350 chipset, which may face challenges against Nvidia's established NVL rack platform. While most analysts remain positive on AMD, with 43 out of 54 maintaining a buy or strong buy rating, HSBC's bearish outlook has cast a shadow over the stock's near-term prospects.
AMD shares are currently trading at $124.72, down 2.05% from the previous close of $127.33 on January 7th.