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Investing.com - The semiconductor sector has been roiled by the introduction of widespread U.S. trade tariffs, and Keybanc Capital Markets has revised its estimates on several companies after its quarterly supply chain findings, with Advanced Micro Devices (NASDAQ:AMD) the most negatively affected.
Keybanc downgraded its stance on AMD to “sector weight” from “overweight”, citing increasing concerns regarding the sustainability of its China AI business; increasing risk given a potential price war with Intel (NASDAQ:INTC); and limited opportunities to gain additional share versus Intel and increasing competition.
“While the stock is relatively inexpensive, trading at 13x our 2026 EPS estimate, semiconductor stocks rarely work with risk to GMs, which we are increasingly concerned about given the aggressive price cuts by Intel,” said analysts at Keybanc, in a note.
The bank said its downgrade is based on Chinese AI demand not being sustainable and may be at risk, while Nvidia (NASDAQ:NVDA) is far ahead with its alternative. Excluding China, there is very little to no growth in AI GPUs this year.
“We believe AMD will be forced to react to Intel’s aggressive price actions in the range of 20-40% on Lunar Lake in order to maintain/regain lost market share to Intel,” said Keybanc.
“We expect Intel progress on 18A [process node] to close the competitive gap with AMD in server/PC. With Intel making good progress on 18A, we are concerned that Intel will be able to close the competitive gap with AMD on both client and server and that it will be increasingly more difficult for AMD to gain additional share,” Keybanc added.