Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) shares were on track to close almost 6% lower on Monday after Bank of America downgraded the stock from Buy to Neutral, citing potential downside risks to the company's 2025 outlook.
The firm also lowered its price target for AMD from $180 to $155, reflecting concerns about increased competition in the artificial intelligence (AI) chip market and a possible slowdown in the PC sector.
The bank reduced its 2025 GPU revenue estimates for AMD to $8 billion from $8.9 billion, significantly below the consensus estimate of $9.6 billion.
Analysts highlighted two key factors contributing to the downgrade, starting with increased competition in AI.
"Higher competitive risks in AI against best-of-breed NVDA's dominance, and growing cloud preference for custom chips from Marvell Technology and Broadcom, limiting AMD's market share gain potential,” Bank of America analysts wrote.
Analysts also highlighted potential PC market weakness.
The analyst noted that AMD's largest cloud customer, Amazon, indicated its preference for alternative custom products, which could limit AMD's ability to gain market share in the AI accelerator market.
Despite the downgrade, Bank of America acknowledged some positive aspects for AMD. "We continue to admire AMD's consistent execution, benefits from rival INTC's ongoing turmoil, and AMD's participation in fast-growing AI market that can help sustain a 15-20% topline growth trajectory."
The downgrade comes as AMD faces intense competition in the AI chip market, particularly from industry leader NVIDIA, which currently holds approximately 80% market share.