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On Wednesday, Jefferies maintained a Hold rating on shares of AMD (NASDAQ:AMD), but reduced the price target from $120 to $100. The adjustment comes amid a reassessment of the company’s growth prospects, particularly in the Artificial Intelligence (AI) sector. Currently trading at $98.62 with a market capitalization of $159.4 billion, AMD’s stock has experienced significant volatility, declining over 34% in the past six months. According to InvestingPro analysis, the company is currently trading at a high P/E ratio of 98.38, reflecting market expectations for future growth. Despite an overall increase in estimates, which could be perceived as a short-term positive against modest expectations, concerns were raised regarding AMD’s AI growth metrics, which have seen lowered estimates.
The report from Jefferies highlighted that while server revenue for AMD remains robust, there is a possibility of market share loss to competitors like Intel (NASDAQ:INTC). The Client segment also showed strength, driven by record average selling prices (ASPs), but faced share declines as well. InvestingPro data shows AMD maintains strong financial health with a "GOOD" overall score, supported by a healthy current ratio of 2.62 and moderate debt levels. The analyst pointed out that the anticipated growth for AI in the second half of 2025 (2H25) is contingent upon the success of the MI350 launch, yet there appears to be little evidence of market traction for the product so far.
Looking ahead to the latter half of the year, expectations for the PC market are to be "sub-seasonal," which may already be factored into forecasts considering a potentially stronger second half, even before considering the impact of any tariff-related demand reductions. The analyst’s stance remains cautious, suggesting that without a compelling AI narrative, there is limited potential for upside in AMD’s stock.
The report also mentions that while AMD’s recent performance in certain segments has been strong, the company’s stock trajectory is closely tied to its achievements in AI. The cautionary note indicates that further price target adjustments could occur if the AI growth outlook does not improve, especially with the need for a significant ramp-up in the latter half of 2025.
In other recent news, Advanced Micro Devices Inc. (AMD) reported impressive financial results for the first quarter of 2025, surpassing Wall Street expectations. The company achieved earnings per share of $0.96, slightly above the forecast of $0.95, and generated revenue of $7.4 billion, exceeding the anticipated $7.11 billion. This performance marks a 36% year-over-year revenue growth, driven by strong demand in core markets despite challenges like export controls in China. AMD’s operating income reached $1.8 billion, representing a 24% operating margin, while gross margin improved to 54%. Looking ahead, AMD projects second-quarter revenue of approximately $7.4 billion, accounting for a $1.5 billion revenue impact due to China export controls. In terms of market analysis, Bernstein maintained a Market Perform rating for AMD, with a price target of $95, noting robust client and gaming revenue. However, concerns persist about revenue pull-forward and the lack of significant growth in AMD’s datacenter GPU segment.
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