Analysts at Baird have lowered their price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock due to their reduced data center revenue outlook and expectation it will take longer than initially thought for the chipmaker to gain artificial intelligence (AI) market share.
They slashed their price target from US$170 to US$125 but awarded the stock an ‘Outperform’ rating.
AMD shares traded hands at about US$103 on Thursday afternoon.
The analysts wrote that they were pushing out their original outlook for AMD to gain meaningful AI market share and ramp timing for the MI300 graphics card due to a lack of design wins outside of supercomputing.
“MI300 actual design win traction at hyperscalers appears absent so far and limited near-term. Supercomputing is where the traction will take place near-term in our view,” they wrote.
“Additionally, AMD’s AI solutions for enterprise remains on a far-out roadmap.”
They added that demand for NVIDIA Corporation (NASDAQ:NVDA)'s GH200 was strong across all sectors, representing a new layer of competition starting in 2024 while proving “cannibalistic” to x86 architectures.
As such, the analysts wrote that they now modelled a 5% market share game in AI for AMD exiting 2024, along with continued share gains for 4th-gen EPYC processors, partially offset by a more muted data center unit growth outlook.
They also pointed to the company’s positive gaming outlook, with a rebound expected to start in the fourth quarter.
They expect a mid-single-digit sequential rebound in 4Q following a 3Q trough driven by inventory normalization in the graphic cards supply chain and renewed demand, in part driven by China, which slightly lifted their 4Q revenue estimate.
“AMD's graphics processing units (GPUs) are also well positioned for on-premise acceleration due to their chipset architecture,” the analysts wrote.
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