Advanced Micro Devices, Inc. (AMD) is a semiconductor giant that produces x86 microprocessors, graphics processing units (GPUs), accelerated processing units, chipsets, and more. The company offers its products under the brand names AMD Ryzen PRO, AMD Ryzen Threadripper, Ryzen Threadripper, AMD Ryzen, and many others. Valued at $211.2 billion, the company has its base of operations in Santa Clara, California.
AMD stock had a solid start to the year, gaining 54% from the start of 2024 to its March high. Since then, though, AMD has underperformed, and is now down 42% from that first-quarter peak. On a year-to-date basis, AMD has lost 11.7%, significantly lagging the broader equities market.
Longer-term, the AI chip giant remains a standout, with AMD boasting a five-year return of 194.8%.
AMD Reports Soft Guidance
AMD reported its third-quarter earnings on Oct. 29 where it posted a profit of $771 million, or $0.92 per share on an adjusted basis, edging past analysts' $0.91 per share estimate. On the revenue front, the semiconductor company posted a total of $6.82 billion during the quarter, easily outpacing the market’s estimated $6.71 billion.
Revenue from the data center segment surged 122% year-over-year to a record $3.5 billion, while client revenue jumped 29% to $1.9 billion, helping to offset weakness in the gaming and embedded segments - down 69% and 25%, respectively.
During the quarter, AMD completed its acquisition of Silo AI, and also announced plans to purchase ZT Systems for $4.9 billion. AMD ended the period with cash and equivalents of $3.89 billion, slightly below last year’s $3.93 billion.
Despite beating Q3 estimates, AMD stock fell 10.6% after earnings, as management’s guidance for the current quarter came up short of estimates. AMD anticipates revenue in the range of $7.2 billion to $7.8 billion, missing Wall Street's consensus of $7.55 billion at the midpoint.
AMD Downgraded at BofA
Analysts in general are very bullish on AMD stock, which has a consensus “Strong Buy” rating and a mean price target of $188.69. That suggests a potential upside of 43.8% from current levels.
However, the stock has one less “Strong Buy” rating than before. On Monday, AMD stock fell more than 5% after Bank of America analyst Vivek Arya downgraded the semiconductor giant from “Buy” to “Neutral.”
In a note to clients, Arya cited stiff competition from formidable rivals AI chip rivals like Nvidia (NVDA), Marvell Technology (MRVL), and Broadcom (AVGO). "AMD’s pipeline remains 1yr+ behind NVDA’s (which is accelerating) and lacks a competitive networking (switching, optics) portfolio," explained Arya.
Additionally, the analyst anticipates a potential slowdown for PC processors in 1H2025, which would be a drag on AMD's results. "AMD’s challenge (and opportunity) in CY25 will be to take share in enterprise PC where INTC is dominant, while fending off threat from ARM-based (QCOM) rivals," according to Arya.
BofA's new price target on AMD is $155, down from $180 previously - suggesting expected upside of more than 18% over the next 12 months.
