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On Wednesday, Citi analysts downgraded shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) from Buy to Neutral, significantly reducing the price target to $110 from the previous $175. The stock, currently trading at $119.5, has seen significant volatility this year, with InvestingPro data showing it’s down over 31% from its 52-week high of $227.3. The decision came after AMD posted its latest financial results and guidance, which, despite showing increased CPU sales, lacked specific forecasts for AI revenue. Citi’s analysis suggests that AMD’s AI revenue is likely to be flat or decline in the first half of 2025, coupled with potential margin dilution.
The downgrade was also influenced by concerns over a potential inventory build-up of CPUs. This buildup is attributed to the growth in CPU sales from both AMD and its competitor Intel (NASDAQ:INTC) in the fourth quarter of 2024. According to InvestingPro analysis, AMD maintains strong financial health with a current ratio of 2.5, indicating solid short-term liquidity despite market concerns. Citi analysts believe that this could lead to downward risks to AMD’s financial estimates and justify a lower valuation multiple for the stock, given the anticipated slowdown in AI growth and the impact on profit margins.
AMD’s financial performance in the latter part of 2024 appeared solid, driven by a surge in CPU sales, with revenue growing 9.88% over the last twelve months to $24.3 billion. However, the absence of AI revenue guidance raised flags for Citi analysts, who interpreted the lack of forecast as an indicator of stagnant or decreasing AI revenue in the upcoming months. This projection, alongside the prospect of shrinking margins, prompted a reassessment of AMD’s stock value and future outlook.
The reassessment by Citi reflects a cautious stance on AMD’s near-term growth prospects, particularly in the AI segment. The analysts’ commentary underscores the challenges AMD may face in maintaining its growth trajectory in the highly competitive semiconductor industry.
Investors and market watchers will likely monitor AMD’s performance closely, especially regarding its AI revenue streams and inventory levels, to gauge the accuracy of Citi’s predictions and the potential impact on the company’s market position and stock performance. For deeper insights, InvestingPro subscribers can access 15+ additional tips and comprehensive valuation metrics, including detailed Fair Value analysis and growth projections for this prominent semiconductor player.
In other recent news, AMD has seen a series of adjustments to its stock price targets by various analyst firms. Piper Sandler lowered the price target from $180 to $140, citing a significant reduction in estimates for AMD’s financials for 2025 and 2026 due to an expected "air pocket" impacting the company. Despite this, the firm maintains an Overweight rating on AMD’s stock, highlighting positive developments in the gaming business and client segment.
Northland reiterated its Outperform rating and $175.00 price target for AMD, following the company’s latest financial results. The firm anticipates robust double-digit growth in artificial intelligence (AI) for 2025 and expects AMD to increase its market share in the server and PC sectors.
Goldman Sachs adjusted its price target on shares of AMD, bringing it down to $125.00 from the previous $129.00. The adjustment follows AMD’s recent financial disclosures, particularly in relation to the data center GPU business.
UBS analyst Timothy Acuri adjusted the price target for AMD stock to $175 from the previous $190, while still recommending it as a Buy. Acuri suggests that more details about the MI400 series planned for 2026 may shift investor sentiment fully back to AMD’s favor.
Lastly, Raymond (NSE:RYMD) James lowered its price target for AMD from $180 to $150, but retained an Outperform rating. The firm believes that achieving a 10-20% market share in the AI GPU segment is within reach for AMD, which could fuel double-digit growth for the next two to three years.
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