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A rising competitive landscape is set to weigh on Advanced Micro Devices even more, according to Goldman Sachs. The bank downgraded the semiconductor stock to neutral from buy, also cutting its 12-month price target to $129 from $175. This updated forecast represents a less than 6% upside for shares of AMD. Shares of AMD shed 18% in 2024 and have added less than 1% this year. AMD 1Y mountain AMD 1Y chart Analyst Toshiya Hari thinks the stock is essentially stuck at current levels until further notice. “We believe the underperformance was driven by weakness in PC and traditional end-demand as well as, more recently, slower-than-expected growth in Data Center GPUs,” he wrote. “We now believe the stock will remain range-bound on a relative basis until the market regains confidence in AMD’s future growth and margin trajectory.” A more competitive landscape for custom central processing units will result in more modest market share gains for AMD through 2026, he wrote. Likewise, moderating growth for data center graphics processing units will keep the stock in check, he said. Hari also believes AMD will be investing heavily for the time being as it tries to compete with Nvidia. This is good for the company’s long-term growth but may present some near-term challenges, he added. “While we perceive management’s organic and inorganic investments — past and current — in a positive light, we expect spending on R & D and SG & A to grow strong double-digits (%) irrespective of the demand environment and for this to weigh on earnings growth and, in turn, the stock’s valuation multiple,” the analyst wrote. This isn’t the first downgrade AMD received this week. HSBC on Wednesday double downgraded the chipmaker to reduce from buy, also citing strong competition. “We see additional downside as we now believe its AI GPU roadmap is less competitive than we previously thought,” analyst Frank Lee wrote. Most analysts remain bullish on AMD. Of the 54 analysts who cover the stock, 42 rate it as a buy or a strong buy. The average analyst price target implies upside of 47.8%.
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