AMD Gets A Downgrade And It's Not DeepSeek Related

Melius Research analyst Ben Reitzes downgraded Advanced Micro Devices AMD from Buy to Hold and lowered the price target from $160 to $129.

Reitzes writes he should have rerated AMD 10 months ago after an epic run for AMD (up over 40% at one point in first-quarter of 2024) and it has nothing to do with DeepSeek.

The analyst cut numbers on GPUs on January 6, and the stock actually went up 3%, so a guide on disappointing MI300 sales for 2025 is already expected.

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He is now more cautious on x86 servers and PCs as well over the long term for AMD.

Reitzes noted that Nvidia Corp NVDA is going to increasingly “come for them” in both markets with its Arm-based CPUs that are optimized for “accelerated PCs.”

Also, the analyst is increasingly concerned that custom and Nvidia CPUs will cannibalize even more of the x86 server market in the long term, even though AMD’s current chip, Turin, is doing well. As a result, he slashed his estimates again and is now well below consensus.

Reitzes’ estimates reflect lower total revenues in PC and server CPUs and slightly lower operating margins due to the mix, specifically in the Data Center segment.

For 2024, the analyst maintained an EPS estimate of $3.33, which reflects revenue growth of 13% Y/Y to $25.6 billion, including Data Center growth of 98% to $12.9 billion (including $5.1 billion in AI GPU sales) and operating margins of 24.2%.

This estimate reflects fourth-quarter 2024 EPS of $1.10, based on revenue growth of 22% to 7.5 billion, including $1.9 billion in AI GPU sales. However, the analyst now estimates 2025 EPS of $4.54 (was recently cut to $4.91), reflecting revenue growth of 19% Y/Y to $30.5 billion (was 22% and $31.4 billion), including Data Center growth of 32% to $17 billion (was 39% and $17.9 billion) and operating margins of 27.6% (was 29.0%).

Reitzes now estimates 2026 EPS of $5.75 (was $6.45), reflecting revenue growth of 17% Y/Y to $35.5 billion (was 19% and $37.3 billion) including Data Center growth of 24% to $21.1 billion (was 25% and $22.4 billion) and operating margins of 29.6% (was 31.6%).

Reitzes now estimates 2027 EPS of $6. 1 (was $7.98) reflecting revenue growth of 12% Y/Y to $39.9 billion (was 15% and $42.9 billion), including Data Center growth of 18% to $24.9 billion (was 20% and $26.8 billion) and operating margins of 30.7% (was 33.4%).

Reitzes noted that the new estimates reflect lower PC CPU revenue growth to 7% in fiscal 2026 (from 10%) and 3% in fiscal 2027 (from 9%), as well as lower traditional data, enter sales growth of 20% in 2026 (from 21%) and 15% in 2027 (from 16%).  

Price Action: AMD stock is down 0.74% at $114.15 at the last check Tuesday.

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