At the time, the market was anticipating Advanced Micro Devices (NASDAQ: AMD) would mount a challenge against Nvidia (NASDAQ: NVDA) in artificial intelligence (AI) chips; an analyst is now cautioning that the firm might not have a competitive edge in the sector.
Specifically, HSBC analyst Frank Lee, in an investor note on January 8, downgraded AMD from ‘Buy’ to ‘Reduce’ and slashed the price target from $200 to $110, citing a less competitive roadmap in the AI GPU market.
The announcement comes after AMD’s stock has already seen an over 20% correction in the past three months, significantly underperforming the PHLX Semiconductor Index’s 12% decline during the same period.
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“We now think AMD’s AI GPU roadmap is less competitive than previously anticipated, limiting its penetration into the AI GPU market,” Lee said.
Lee expressed concerns over AMD’s ability to penetrate the lucrative AI GPU market, citing lukewarm demand for its MI325 GPU.
A key issue is the lower-spec HBM3e memory expected in the MI325, a limitation tied to Samsung’s ongoing production challenges with higher-spec HBM3e modules.
While AMD plans to launch its MI350 chip in the second half of 2025, the expert noted that the company’s competitive positioning could remain weak until the launch of its MI400 chip, expected in late 2025 or early 2026.
Without a robust AI rack solution to rival Nvidia’s NVL platform, AMD may struggle to capture market share in AI-driven data center solutions.
Beating Nvidia’s dominance
These projections come when industry leader Nvidia is flying high after CEO Jensen Huang unveiled the company’s future technologies. During his CES address, Huang outlined Nvidia’s lead in AI, unveiling new GeForce GPUs and Project Digits for advanced AI tasks.
He envisioned a future with 1 billion robots, 10 million factories, and 1.5 billion autonomous vehicles, all powered by Nvidia technology. He also noted that the next-generation Blackwell AI chips, now in full production, are expected to maintain Nvidia’s edge over competitors like AMD regarding AI performance and market dominance.
It’s worth noting that AMD investor attention is turned to the company’s release of Q4 earnings slated for January 28. During the call, the company’s MI300 sales are expected to surpass $5 billion, contributing to total revenues of $7.5 billion.
At the same time, analysts’ consensus expects $1.08 per share earnings, with $4.15 billion from data centers, $1.95 billion in client sales, and $1.4 billion from gaming and embedded sectors.
Despite strong earnings projections, AMD faces key challenges. For instance, Wedbush analyst Dan Ives highlighted that the Texas-based company is lagging in the AI race, saying it’s “lost behind Nvidia.”
AMD stock price analysis
By press time, AMD stock was trading at $127.33, ending the last trading session down 1.7%. Amid the HSBC downgrades, investors appear rattled, with the stock down almost 3% in pre-market trading, valued at $124.
To compete with Nvidia, AMD must fast-track its AI GPU development, resolve memory supply issues, and build a rival to Nvidia’s NVL platform. With strong earnings ahead, AMD has the resources, but closing the gap requires swift, aggressive innovation in AI technology.
However, if AMD drops to the projected levels, the price could be considered a bargain provided the company takes steps to compete with Nvidia.
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