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On Thursday, Advanced Micro Devices, Inc. (NASDAQ:AMD) saw its stock rating downgraded by analysts at Jefferies from ’Buy’ to ’Hold’. Accompanying this downgrade, the firm also reduced its price target for AMD shares from $135.00 to $120.00. The downgrade comes amid broader analyst concerns, with InvestingPro data showing 17 analysts recently revising their earnings expectations downward. The stock has experienced significant volatility, declining nearly 33% over the past six months.
The decision to adjust the investment stance on AMD was influenced by the company’s performance in the artificial intelligence (AI) market. Despite initial optimism when Jefferies assumed coverage in May 2024, the firm has not observed significant progress in AMD’s AI segment. This lack of traction challenges the optimistic revenue projections of $10-15 billion for AMD in the AI space for the years 2026 and 2027. Current InvestingPro data shows AMD’s revenue growing at 13.69%, with the company maintaining strong gross margins of 53%.
Jefferies cited the competitive landscape as a contributing factor to their revised outlook. They noted that the new management at Intel (NASDAQ:INTC) could serve as a catalyst for the company to enhance its competitive edge, especially within the Client PC market. This potential shift in market dynamics has prompted Jefferies to adopt a more cautious approach towards AMD. Despite competitive pressures, AMD maintains a strong financial position with a current ratio of 2.62, indicating ample liquidity to meet short-term obligations.
The analysis by Jefferies suggests a wait-and-see attitude, as they recommend staying on the sidelines until there is a clearer understanding of AMD’s progress in AI and Intel’s strategic response. The firm awaits a reset of estimates and further clarity on these matters before reassessing their position on AMD stock.
This revised rating and price target reflect Jefferies’ current view of AMD’s market position and future prospects, particularly in relation to its AI initiatives and the anticipated competitive response from Intel.
In other recent news, AMD has announced that its Versal AI Edge XQRVE2302, a radiation-tolerant device, is now qualified for spaceflight and available for order. This device, part of AMD’s space-grade Versal adaptive SoC portfolio, is designed for space applications and features enhanced AI Engines optimized for machine learning. In collaboration with Cisco (NASDAQ:CSCO), Nokia (HE:NOKIA), and Jio Platforms, AMD is also set to develop the Open Telecom (BCBA:TECO2m) AI Platform to enhance telecom platforms with AI-driven solutions. AMD will provide high-performance computing solutions, including EPYC CPUs and Instinct GPUs, as part of this initiative.
In terms of financial outlook, Mizuho (NYSE:MFG) Securities has reduced its price target for AMD from $140 to $120, maintaining an Outperform rating despite anticipated challenges in the AI sector. The firm has adjusted its revenue and earnings projections for fiscal years 2025 and 2026, aligning closely with consensus estimates. Meanwhile, JPMorgan has reiterated a Neutral rating for AMD with a $130 price target, expressing confidence in AMD’s growth prospects, particularly in the server CPU and AI GPU markets. The firm highlights AMD’s projected double-digit growth for 2025, supported by market share gains and demand trends.
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