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AMD might find itself struggling to keep up in the AI race, but it still has plenty of potential in more mature markets, analysts say.
Advanced Micro Devices (AMD) shares dropped about 18% in 2024 as the company struggled to meet investors' expectations for its efforts to develop and sell chips for artificial-intelligence applications.
The share slump followed AMD's sharp rally in 2023 when the shares doubled due to the excitement around AI-related growth potential.
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Last year, rivals such as Broadcom (AVGO) and Marvell Technology (MRVL) rallied 108% and 83%, respectively.
While Nvidia (NVDA) recently stalled, the AI-chip-market leader surged more than 170% in 2024. making the stock one of the top Nasdaq performers last year.
Now, with the White House cracking down on AI-chip exports to China, AMD might face a tougher road ahead. But that's not the end of the AMD story.
Challenges mount for AMD in AI expansion
AI is a big part of AMD, but the company's AI-market share remained significantly lower than that of Nvidia, which dominates the market for AI graphics processors.
According to data by Jon Peddie Research, Nvidia now holds a 90% share in the GPU market, while AMD accounts for roughly 10%.
Related: Analyst overhauls AMD stock price target as gap with Nvidia widens
In October 2024, AMD reported its Q3 results, meeting earnings expectations and exceeding revenue forecasts. But its Q4 revenue outlook fell short of Wall Street predictions. The company estimated revenue at $7.5 billion, below the $7.55 billion consensus analyst estimate.
AMD also faces challenges in meeting the growing demand for its AI processors, with CEO Lisa Su suggesting that chip supplies could be tight in 2025.
"And going into the next few quarters going into 2025, I think we expect that the environment will continue to be tight, but we've also planned for significant growth going into 2025. And so we feel good about our overall supply chain capability," Su said on the company's Q3 earnings call.
"The concern from here is that AMD won't be able to provide upside to [Wall] Street estimates that are already $8 billion-$9 billion for calendar 2025," Jefferies analysts said following AMD's earnings, Reuters reported.
AMD is scheduled to report Q4 and full-year 2024 financial results on Feb. 4 after the closing bell.
Analysts mixed on AMD stock in 2025
On Jan. 13, KeyBanc analyst John Vinh lowered AMD's price target to $150 from $220 and affirmed an overweight rating.