Goldman Sachs has downgraded Advanced Micro Devices (AMD) from a "Buy" to a "Neutral" rating, citing a challenging competitive landscape and slower-than-expected growth in key segments. The investment bank also slashed its 12-month price target for AMD to $129 from $175, reflecting a modest upside of less than 6% from current levels. Analyst Toshiya Hari expressed concerns over AMD's ability to maintain its growth trajectory amid rising competition from Arm-based custom CPUs and a more competitive environment in accelerated computing. Hari noted that while AMD has been successful in capturing market share from Intel in x86-based computing, the company faces headwinds that could weigh on its revenue growth and operating expenses.
The downgrade comes as AMD grapples with underperformance in its PC and traditional server segments, as well as slower growth in its Data Center GPU business. Goldman Sachs highlighted that AMD's stock has lagged behind the S&P 500, attributing this to weaknesses in end-demand and increased competition. The report suggests that AMD's stock may remain range-bound until the market regains confidence in its growth and margin prospects. Additionally, the company is expected to continue investing heavily in research and development to compete with rivals like Nvidia, which could impact earnings growth in the near term.
AMD shares are currently trading at $116.04, down 4.76% from the previous close of $121.84 on January 9th.