KeyBanc analyst John Vinh downgraded Advanced Micro Devices (AMD) to "sector weight" from "overweight," citing rising competition and risks related to China. Vinh expressed concerns about AMD's reduced fourth-quarter revenue outlook and the potential for decreased demand from Chinese hyperscalers due to export restrictions. He also noted that Nvidia is significantly ahead of AMD in AI GPU technology.
The downgrade also considers increased competition from Intel. Vinh anticipates that Intel's price cuts could force AMD into a price war, potentially impacting its gross margins. He believes AMD may need to match Intel's price reductions significantly to maintain market share.
Vinh believes that the demand for AI from China may not be sustainable, further contributing to the downgrade. He emphasized that excluding China, growth in AI GPUs is limited this year.
Despite the downgrade, the majority of analysts covering AMD maintain a bullish outlook, with 32 out of 50 rating the stock as a buy or strong buy. The average price target also indicates significant potential upside.
Chipmaker Advanced Micro Devices could fall behind its peers given mounting tariff risks and price competition, according to KeyBanc. Analyst John Vinh downgraded AMD to sector weight from overweight. Vinh does not have a price target on the stock, but lowered his gross margin expectations. Shares of AMD have plummeted more than 30.5% this year amid the broader market sell-off and concerns about the company's lighter fourth-quarter revenue outlook. Looking ahead, Vinh believes the stock could be handicapped by greater competition from Nvidia and a potential slowdown in its China business, as more export restrictions could limit demand for AMD's chips from Chinese hyperscalers. "China AI demand may not be sustainable and may be at risk, while NVDA is so far ahead with GB200/NVL," Vinh said. "We estimate 2025 MI308 GPUs volumes at 300K and reflect the majority of the growth for AMD. Excluding China, there is very little to no growth in AI GPUs this year." AMD 1Y mountain AMD stock in past year Nvidia isn't the only chipmaker threatening AMD. Vinh believes Intel's price cuts could also "force AMD into a price war" and put its gross margins at risk. AMD also has limited opportunities to gain additional share in the server and PC market compared to Intel, particularly if Intel makes progress on its 18A process node, he said. "We believe AMD will be forced to react to INTC's aggressive price actions in the range of 20-40% on Lunar Lake in order to maintain/regain lost market share to INTC," Vinh said, referring to Intel's Lunar Lake power-efficient mobile processors released in Sept 2024. "While the stock is relatively inexpensive, trading at 13x our 2026 EPS estimate, semiconductor stocks rarely work with risk to GMs, which we are increasingly concerned about given the aggressive price cuts by INTC," he added. AMD fell slightly after the downgrade. Most analysts remain bullish on the chipmaker, however. LSEG data shows that 32 of the 50 who cover the stock rate it a buy or strong buy. The average price target also implies upside of more than 70%. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today's dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You'll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
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