AMD (NASDAQ: AMD) had it rough last week, dropping more than 6% on Friday following Broadcom’s (NASDAQ: AVGO) impressive quarterly results and news of a $10 billion order for custom chips from a client widely believed to be none other than OpenAI.
The turn of events could presage a potential shift in the market. Namely, while graphics processing units (GPUs) have so far been the key in driving generative artificial intelligence (AI), custom silicon chips designed for specific AI tasks are emerging as a viable alternative.
Now, AMD faces a more complicated issue, competing with Nvidia (NASDAQ: NVDA) as the dominant GPU ecosystem and trying to rise up to the challenge posed by Application-Specific Integrated Circuit (ASICS), which could reduce demand for its products.
Accordingly, HSBC reduced its AMD price target from $200 to $185 on September 9, albeit maintaining a “Buy” rating. As of the time of writing, the average price target for the stock is now $184.74 for the next 12 months, the lowest predictions sitting at $120 while the highest go up as far $230, according to TipRanks.
AMD stock downgraded
In addition to downgrading the stock price, HSBC lowered its 2026 AI GPU revenue forecast for AMD from $15.1 billion to $13.9 billion.
Nonetheless, the bank noted that Wall Street may still be underestimating the pricing potential of AMD’s AI GPU business, expecting cloud providers such as Meta (NASDAQ: META) to begin testing the company’s MI400 rack solution.
The MI300 series has also shown a lot of promise, but it has yet to secure large-scale, high-profile customer adoption, while Broadcom’s Tomahawk switches allow it to offer hyperscalers a more integrated solution.
In other news, AMD has partnered with IBM (NYSE: IBM) to advance quantum-centric supercomputing architectures by combining IBM’s quantum systems with its own computing and AI accelerators.
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