Goldman Sachs has downgraded Advanced Micro Devices (AMD) from a "Buy" rating to "Neutral," also lowering the price target to $129 from a previous $175. This change reflects concerns about increased competition and slower-than-expected growth in key areas.
Analyst Concerns
Analyst Toshiya Hari cited the following concerns as reasons for the downgrade:
Although we remain constructive on AMD's ability to take share from Intel in x86-based compute across PCs and traditional servers, we are increasingly concerned that the rise of Arm-based custom CPUs and heightened competition in accelerated computing will:
- weigh on AMD's revenue growth relative to peers,
- exert upward pressure on AMD's operating expenses, and
- weigh on the stock's multiple.
Goldman Sachs Downgrades $AMD to Neutral from Buy, Lowers PT to $129 from $175
— Wall St Engine (@wallstengine) January 10, 2025
Analyst comments: "Although we remain constructive on AMD's ability to take share from Intel in x86-based compute across PCs and traditional servers, we are increasingly concerned that the rise of…
Stock Performance and Outlook
The report noted that while AMD's stock has risen 50% since being added to the "Buy" list on 11/04/2020, it has underperformed the S&P 500 (+72%) over the same period. Goldman Sachs attributes this underperformance to weaknesses in PC and traditional server demand, as well as slower growth in Data Center GPUs.
The analysts now expect AMD's stock price to remain range-bound until the market regains confidence in the company's future growth trajectory and margin potential.
Key Takeaways
In summary, Goldman Sachs's downgrade reflects growing concerns regarding the impact of Arm-based CPUs and increased competition in accelerated computing on AMD's revenue, expenses, and overall stock performance.
