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Investing.com -- Melius Research on Tuesday downgraded AMD (NASDAQ:AMD) stock to Hold from Buy, raising concerns over the long-term prospects for the chipmaker in the x86 server and PC markets.
The firm also trimmed its AMD price target to $129 from $160.
Melius analysts said the decision to downgrade AMD stock was driven by the anticipation that Nvidia (NASDAQ:NVDA) will intensify competition with its Arm-based CPUs, which are optimized for accelerated PCs.
“We think Nvidia is going to increasingly "come for them" in both markets with their Arm-based CPUs that are optimized for "accelerated PCs",” Melius analysts led by Ben Reitzes said in a note.
“Also, we are increasingly concerned that custom CPUs and Nvidia CPUs will cannibalize even more of the x86 server market long-term even though AMD's current chip, Turin, is doing well,” they added.
The firm also noted that major cloud providers might increasingly adopt custom CPUs, like AWS's Graviton, posing further challenges to AMD.
Melius has adjusted its revenue growth estimates for AMD. The firm now projects only a 3% growth in AMD’s PC CPU revenue by 2027, down from the previous estimate of 9%. This revision reflects concerns over Nvidia's potential to capture a larger share of the PC hardware market.
Commenting on the GPU segment, analysts note that AMD's MI300X GPU momentum seems to have stalled. Revenue projections for 2025 have been adjusted to $7 billion, down from the previously anticipated $10 billion.
“Checks indicate AMD's MI300x GPUs are seeing some growing pains from the market participants around the ROCm software stack and a market that is acutely focused on the ramp of Nvidia's Blackwell,” analysts explained.
“More AMD GPU sales have been pushed into the back half of 2025 and rests on the shoulders of the highly anticipated MI350x, which boasts higher memory and TFLOPs (on paper) than the Nvidia B200. However, by then Nvidia should provide details around the Blackwell Ultra that ship by 4Q25.”
To account for these concerns, Melius analysts slashed their earnings per share (EPS), revenue, and operating margin estimates for AMD for 2025, 2026, and 2027.