In a year when semiconductor stocks and chipmakers generally saw impressive performances across the board, Advanced Micro Devices (NASDAQ: AMD) has been struggling. This was by no means a foregone conclusion — in the first quarter of 2024, AMD stock price surged from $138 in January to a yearly high of $211.38 in early March.
This 53.17% rally proved to be temporary, however — the initial optimism centered on AMD’s strategic positioning in the burgeoning AI market fizzled out. By the beginning of May, a single Advanced Micro Devices share could be had for as little as $144.
At press time, AMD stock was trading at $130.94 — having erased all of its yearly gains. Over the course of the last thirty days, Advanced Micro Devices shares have seen prices drop by 11.18% — and in the last week, prices have decreased by 7.50%.
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On a year-to-date (YTD) basis, AMD shares are down 5.52%, and seem set to close the year at a loss.
So, what caused this latest move to the downside? On December 9, a Bank of America analyst revised his price target downward — and downgraded the stock’s rating.
BofA sees strong headwinds in the cards for AMD stock
In a note shared with investors, BofA managing director Vivek Arya set a price target of $155 for AMD stock — down from the previous $180 forecast. In addition, the analyst downgraded the stock to a ‘ Neutral’ rating — it was previously rated a ‘Buy’.
The crux of Arya’s arguments is centered around Nvidia’s dominant market position. He reflected on the fact that Amazon, the largest cloud customer, and Google have shown a strong preference for Nvidia products.
In tandem, he noted that, although AMD maintains a strong presence at Microsoft, Meta, and Oracle, all of those companies plan to spend heavily to acquire Nvidia’s new line of Blackwell chips going forward.
Arya also added that: ‘there is growing cloud preference for Marvell’s and Broadcom‘s custom chips, which limits AMD’s market share gain potential’.
On a slightly brighter note, the researcher noted that AMD could expand its position in the CPU market, with Intel now heading into restructuring. He did, however, temper his expectations — stating that he doubts AMD’s current growth in the PC processor segment is sustainable.
Finally, the managing director highlighted a slightly less impactful, yet favorable possibility — that AMD stock could see some benefits from Nvidia’s chip supply constraints.
On average, Wall Street is significantly more optimistic about AMD stock
Vivek Arya’s new price target isn’t the lowest on the Street — but it is at the lower end of estimates. On average, equity researchers from Wall Street’s premier firms set a 12-month price forecast of $187.04 — a figure that equates to a 42.84% upside compared to the AMD stock price at the time of publication.
Arya’s price target, on the other hand, sees a much smaller, yet still significant 18.37% rally in the cards.
AMD is definitely in a tough position — as decent as it was, the company’s latest earnings report failed to secure the trust of investors, who are flocking in droves to rivals and peers who appear to have higher odds of securing outsized returns.
Lastly, even though it was made according to a prearranged schedule, data from Finbold’s insider trading radar shows that AMD’s chief executive officer (CEO) Lisa Su sold roughly $11 million in AMD stock on December 4. Although that is by no means unusual, the sale does not engender confidence in the company’s short to medium-term performance.
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