AMD stock plunged Wednesday after Advanced Micro Devices (AMD) reported weaker-than-expected sales of graphics processing units for artificial intelligence data centers.
The Santa Clara, Calif.-based company beat estimates on the top and bottom lines for the fourth quarter thanks to growth its mature PC and server businesses. AMD likely took market share in those segments from struggling rival Intel (INTC).
But AMD missed views for data center GPU sales in Q4 and with its outlook for that business. AI chip leader Nvidia (NVDA) continues to dominate the GPU market.
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NOW PLAYING How To Avoid Surprise Drops In Generative AI Growth Stocks AMD’s data center GPU sales in Q4 were $1.75 billion, below estimates for about $2 billion.
AMD predicted flat AI GPU sales in the first half of 2025 followed by growth in the second half of the year. AMD plans to release its next-generation data center GPUs, the MI350 series, in mid-2025.
In late morning trades on the stock market today, AMD stock dropped more than 8% to 109.88. Earlier in the session, it was down as much as 10.9% to 106.50. AMD stock is at its lowest level since November 2023.
BofA Securities analyst Vivek Arya reiterated his neutral rating on AMD stock and lowered his price target to 135 from 155.
AMD has not yet shown it can make headway against Nvidia in graphics processors, Arya said in a client note. Meanwhile, it faces encroachment in the AI chip market from makers of application-specific integrated circuits, namely Broadcom (AVGO) and Marvell Technology (MRVL).
“With Nvidia continuing to execute and custom ASICs seemingly gaining more traction at hyperscalers, we think it could be hard for AMD to ‘win’ the AI narrative despite the absolute AI growth rate,” Arya said.
AMD Stock Gets Price-Target Cuts
At least 18 Wall Street analysts cut their price targets on AMD stock after the company’s Q4 report late Tuesday. Citi downgraded AMD stock to neutral from buy.
On a conference call with analysts, AMD Chief Executive Lisa Su predicted that the company will scale its data center AI business from more than $5 billion in sales in 2024 to “tens of billions of dollars of annual revenue over the coming years.”
Bernstein analyst Stacy Rasgon maintained his market perform rating on AMD stock and cut his price target to 125 from 150.
In a client note, Rasgon said it is conceivable that AMD could do $7 billion to $8 billion in data center GPU sales in 2025. However, given the forecast for soft first-half sales, AMD would need “a sizable hockey stick” in growth in the second half of the year to get there, he said. And that’s “unpalatable” to investors, Rasgon said.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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