TLDR
- Seaport downgraded AMD to Neutral citing slower AI accelerator growth
- Trial customers haven’t converted to large orders for MI Series chips
- Microsoft and Meta reviewing AI budgets could limit future orders
- AMD using more discounts to drive sales, pressuring profit margins
- Wall Street maintains average $184.91 price target despite concerns
Advanced Micro Devices stock dropped after Seaport Research downgraded shares to Neutral from Buy. The downgrade centers on weaker progress in AMD’s AI accelerator business.
Analyst Jay Goldberg pointed to supply chain checks showing slower momentum. AMD struggles to convert early customers into major buyers for its AI chips.
The company showcased multiple customers at its recent AI event. However, most have only purchased trial systems for AMD’s MI Series accelerators.
Customer Adoption Challenges
AMD faces difficulty turning small trial orders into large-scale purchases. Goldberg expects meaningful conversions won’t happen until future product generations arrive.
Major customers Microsoft and Meta are reviewing their AI spending budgets. These reviews could limit near-term chip orders from two key potential buyers.
The budget uncertainty creates revenue visibility issues for AMD. Management may struggle to forecast AI division performance in coming quarters.
AMD has increased its use of customer discounts and support programs. The company hopes these incentives will accelerate AI chip adoption rates.
Margin Pressure Concerns
Heavy discounting strategies raise profit margin concerns. AMD may sacrifice profitability to gain market share in competitive AI markets.
Goldberg warned that discount programs combined with weak demand visibility could hurt financial performance. This creates a challenging balance between growth and profitability.
Despite current challenges, AMD remains well-positioned long-term in AI chips. The analyst noted the company stays competitive against industry leaders.
Wall Street Remains Optimistic
Most analysts maintain positive ratings on AMD stock. Out of 37 analysts, 26 rate it Buy while 11 suggest Hold.
The average price target of $184.91 implies 14% upside from current levels. Stifel targets $190 while Raymond James sees $200 potential.
Bank of America reiterated its Buy rating with a $200 target. This reflects continued confidence in AMD’s fundamental business strength.
No analysts currently recommend selling the stock. This unanimous support shows Wall Street believes in the company’s core strategy.
AMD trades at $161.79, down 8% over the past month. Year-to-date gains of 37% still outpace many tech peers.
The stock maintains strong performance despite recent headwinds. Revenue growth continues across most business segments outside AI concerns.
Supply chain data suggests third-quarter AI accelerator shipments may fall short of earlier projections.
