Shares of chipmaker Advanced Micro Devices (AMD -6.01%) fell 5.4% in Monday trading, as of 2 p.m. ET.
The semiconductor stock fell today on the heels of an analyst downgrade from a Wall Street sell-side analyst, capping off a difficult few trading days for the artificial intelligence (AI) hopeful.
Bank of America downgrades
Today, Bank of America analyst Vivek Arya downgraded AMD to neutral from buy, while lowering his price target from $180 to $155.
The timing of today’s downgrade was also noteworthy. On Friday, AMD’s stock also declined following a statement from an Amazon executive that Amazon Web Services (AWS), the largest cloud platform on the planet, was “not yet seeing” demand for AMD’s MI300 roster of AI GPUs.
AMD had hoped to make inroads in the exploding AI market, but at least this quote suggests the major clouds are either buying leader Nvidia‘s most advanced chips or merely making their own in-house designed training chips at lower cost. Just last week, Amazon said its Trainium2 chips were available, and that it was building a “supercluster” with said Trainium chips for outside customers and AI start-up Anthropic, in which Amazon has invested.
Apparently, BofA sees the rise of cheaper internally made chips from all cloud providers, as well as Nvidia’s upcoming Blackwell chip, as crowding out the opportunity for AMD in AI. Additionally, Arya noted some have projected soft PC demand in the first half of 2025, which could further weigh on AMD results.
AMD could be vulnerable
AMD has been a stock market darling for a number of years, but that has pushed its valuation up to 122 times earnings and nearly 30 times next year’s projections. With expectations so high, it’s perhaps not surprising to see the stock react this harshly on today’s downgrade.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of Motley Fool Money. Billy Duberstein and/or his clients have positions in Amazon and Bank of America. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Bank of America, and Nvidia. The Motley Fool has a disclosure policy.
