Advanced Micro Devices (AMD) shares fell 5.4% in Monday trading, following an analyst downgrade from Bank of America. The semiconductor stock was downgraded to neutral from buy, with a price target lowered from $180 to $155.
The move comes after AMD’s disappointing performance on Friday, when Amazon Web Services (AWS) said it wasn’t seeing demand for its MI300 lineup of AI GPUs. This suggests that major clouds like AWS and others are opting for Nvidia’s advanced chips or developing their own in-house designs at lower costs.
Bank of America analyst Vivek Arya believes the rise of cheaper internally made chips from cloud providers, including Nvidia’s upcoming Blackwell chip, will crowd out AMD’s opportunity in the AI market. Additionally, soft PC demand projections for 2025 could further weigh on AMD’s results.
With high expectations and a valuation of over 122 times earnings, AMD’s stock reaction to the downgrade is not surprising. However, investors should consider alternative options. The Motley Fool’s Stock Advisor service identified Nvidia as one of its top picks in April 2005, with an investment potential of $872,947.
Source: https://finance.yahoo.com/news/why-advanced-micro-devices-plunged-203552435.html