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Advanced Micro Devices' (NASDAQ:AMD) investors, brace yourselves. HSBC just hit the brakes on the chipmaker, downgrading the stock from Buy to Reduce and slashing its price target from $200 to $110a move that signals a rocky road ahead. HSBC analyst Frank Lee didn't hold back, pointing to AMD's lackluster prospects in the red-hot AI GPU market. He highlighted weak demand for AMD's MI325 GPU and delays in catching up with Nvidia's (NASDAQ:NVDA) market-dominating NVL rack platform. Lee also slashed AMD's FY2025 AI GPU revenue forecast by 34% to $8.1 billion, a stark contrast to the $9.5 billion consensus estimate. AMD's share price has corrected by 24% in the past three months but we believe there remains further downside, Lee said.
The pain doesn't stop there. Outside the AI arena, AMD's momentum looks shaky. Client revenue growth is expected to slow to 12% year-over-year in FY2025, a steep drop from the 44% growth forecast for FY2024. Non-AI data center revenue is underwhelming too, thanks to muted server industry growth. Meanwhile, AMD's competitorsNvidia, Marvell (NASDAQ:MRVL), and Broadcom (NASDAQ:AVGO)are turning up the heat. Adding insult to injury, AMD's next-gen AI GPU and rack solutions likely won't make a splash until late 2025 or early 2026, further delaying the company's ability to grab meaningful AI market share. Investors didn't take the news lightlyAMD shares dropped 4.3% this morning after the downgrade.
Still, not everyone's jumping ship. S&P Global data shows most analysts are sticking with a Buy rating on AMD, with an average price target of $180a potential 50% upside from current levels. Mizuho analysts remain bullish, citing AMD's untapped growth in AI GPUs and its well-positioned strategy. But others, like Bank of America Securities, are more cautious, flagging AMD's lagging data center accelerators and the growing threat from custom silicon solutions. The bottom line? AMD's future may hold promise, but in the short term, it's a battleground stock caught in a high-stakes game of catch-up.
This article first appeared on GuruFocus.