AMD Stock Faces Challenges in AI Market, Analyst Lowers Price Target

AMD, the renowned semiconductor company, has experienced a significant surge in its stock price, rising by an impressive 57% in 2023. However, recent developments in the artificial intelligence (AI) market have led to a more cautious outlook for the company’s stock.

According to analyst Tristan Gerra from Dreamstime Baird Equity Research, AMD’s slower uptake in the AI chip market has prompted a revision of his price target for the company’s stock. Gerra has lowered the target to $125 per share from $170, but he maintains an Outperform rating for the stock.

The revised outlook is primarily based on the delayed market share and ramp timing for AMD’s upcoming AI chip, the MI300. Gerra suggests that AMD is lagging behind its main competitor, Nvidia, in terms of AI software tools and developer support for its chips. Nvidia’s leadership in AI-related software, particularly its robust software programming ecosystem called CUDA, has made it a preferred choice for many start-ups and corporations.

Gerra estimates that AMD will have a 5% share of the AI chip market by the end of 2024, citing a lack of design wins thus far. However, it’s important to note that AMD stock has still shown strong performance, rising approximately 48% over the past 12 months, outpacing the iShares Semiconductor exchange-traded fund (SOXX), which has risen by 34%.

While AMD faces challenges in the AI market, the company continues to innovate and develop its offerings. Investors will be closely monitoring AMD’s progress in the AI sector, as it plays a crucial role in the future of technology.

For more information, please contact Tae Kim at tae.kim@barrons.com.