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Investing.com -- Daiwa has downgraded Advanced Micro Devices (NASDAQ:AMD) to Outperform from Buy and slashed its price target for the stock to $130 from $170, citing weaker-than-expected first-half guidance for 2025.
While AMD’s Q4 2024 results were strong, analysts flagged a material disappointment in GPU sales, which is holding the company back from achieving an "AI premium."
"4Q24 results were good, but 1H25 guidance below expectations," Daiwa wrote. AMD’s Q1 2025 revenue guidance of $7.1 billion came in $105 million above Street estimates, but the firm noted that data center revenue for the first half of the year is expected to decline.
"The DC guidance for 1H25 is to be ‘consistent’ with results of 2H24, which was revenue of $7.4b. This would suggest that DC 1H25 has to come down ~$800m from our/street expectations," Daiwa explained.
In Q4, AMD posted $7.7 billion in revenue, 24% year-over-year growth, and an earnings per share (EPS) of $1.09, slightly ahead of estimates.
Data Center revenue surged 69% year-over-year but came in below expectations at $3.86 billion versus $4.14 billion. Meanwhile, Client revenue jumped 58% year-over-year, while Gaming revenue declined 59%, impacted by console inventory reductions.
Daiwa pointed to slower-than-expected adoption of the MI325 GPU as a key reason for the stock’s underperformance.
"The big issue is the material disappointment in GPUs as Ml325 seems to be ramping slower than expected," the analysts said. While AMD maintains a >50% share in hyperscalers, competition from Nvidia (NASDAQ:NVDA) remains dominant.
Looking ahead, Daiwa expects a strong second half of 2025 as AMD’s MI350 GPU ramps up earlier than planned, but for now, the firm remains cautious on the weaker-than-expected first-half guidance.