AMD's AI Ambitions Face NVIDIA's Dominance—Analysts See Growth, But Challenges Remain

Advanced Micro Devices, Inc. AMD shares are trading lower on Wednesday.

Yesterday, the company reported fourth-quarter revenue of $7.66 billion, beating analyst estimates of $7.53 billion. The chipmaker reported fourth-quarter adjusted earnings of $1.09 per share, beating analyst estimates of $1.08 per share.

AMD expects first-quarter revenue of approximately $7.1 billion, plus or minus $300 million. The company’s revenue guidance represents year-over-year growth of approximately 30% at the midpoint.

Here are the analysts’ takes on the earnings results:

BofA Securities analyst Vivek Arya reiterated the Neutral rating on the stock, lowering the price forecast to $135 from $155.

The analyst noted the company’s struggle to carve out a niche against NVIDIA Corporation‘s dominance and the rise of custom AI chips.

The analyst writes AMD’s fourth quarter was in line with expectations, with stronger PC sales offsetting weakness in data centers.

Arya adds that first quarter sales are expected to be modestly better, driven by consumer PC and gaming, unlike Intel Corporation’s weaker outlook.

For the AI GPU segment, the analyst now forecasts $7.5 billion in 2025, slightly lower than the previous $8 billion estimate.

Goldman Sachs analyst Toshiya Hari maintained Neutral rating on Advanced Micro Devices, lowering the price forecast to $125 from $129. The analyst raises 2025 and 2026 revenue estimates by 5% and 4% due to stronger Client and Gaming segments, despite lower Data Center and Embedded revenue.

Non-GAAP EPS estimates for 2025 and 2026 increase by 6% and 1%, reaching $4.56 and $6.10, driven by higher revenue, partly offset by lower gross margins and higher operating expenses.

The analyst also introduces 2027 revenue estimates of $46.6 billion (+18% year over year) and non-GAAP EPS of $7.66 (+26% year over year).

JP Morgan analyst Harlan Sur maintained the Neutral rating on Advanced Micro Devices, lowering the price forecast to $130 from $180.

The analyst notes Advanced Micro Devices’ mixed demand in Embedded, with strong performance in aerospace/defense and test/emulation, but challenges in cyclical sectors like industrial and communication.

However, per Sur, these sectors will stabilize by mid-year as market recovery picks up in the second half. The analyst lowers forward estimates due to weaker-than-expected demand for data center GPUs.

Benchmark analyst Cody Acree reiterated the Buy rating on the stock, lowering the price forecast to $170 from $200.

The analyst views the company’s report and outlook as solid, attributing the softness in GPU guidance to a positive product transition.

Customers are eagerly awaiting the next-gen platform, which was pulled forward, Acree writes.

After surpassing its $5 billion AI GPU revenue goal for FY24, the company expects a slower revenue pace in the first half of 2025 as customers focus on existing programs while awaiting the MI350 platform release. The production ramp for MI350 has been moved up by a quarter, now expected in mid-2025 instead of the second half, Acree adds.

Rosenblatt analyst Hans Mosesmann reiterated the Buy rating, lowering the price forecast from $250 to $225.

Mosesmann lowers the 2025 MI300 series sales forecast to $7 billion from $9.2 billion, reflecting a flatter 2H24 to 1H25 product transition to MI325/350X.

Northland analyst Gus Richard reiterated the Outperform rating on AMD, with a price forecast of $175.

AI revenue is expected to stay flat in the first half of 2025 and the second half of 2024, raising concerns, but a stronger second half is anticipated, with $9.2 billion in AI revenue on the back of the MI350 in the latter half.

After being oversold, Advanced Micro Devices shares bounced, and the analyst recommends buying on weakness.

Price Action: AMD shares are trading lower by 7.82% to $110.16 at last check Wednesday.

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