DeepSeek's R1 AI model seems to have undermined the prevailing narrative around hyperscalers, wounding NVIDIA in the process. Even so, NVIDIA remains the strongest horse in the proverbial stable. As evidence, look no further than AMD, which has just received another downgrade, and that too on a vector wholly unrelated to the ongoing DeepSeek-related saga.
Melius Downgrades $AMD to Hold from Buy, Cuts PT to $129 from $160, Cites Increased Pressure on Profit Pools
Analyst comments: "We should have done this 10 months ago after an epic run for AMD (up over 40% at one point in 1Q24) - so we better have a reason. Believe it or not,…
— Wall St Engine (@wallstengine) January 28, 2025
To wit, Melius Research analyst Ben Reitzes has now downgraded AMD to a 'Hold' rating, while conceding that he should have done so "10 months ago."
Reitzes then points out that his AMD downgrade is wholly unrelated to the DeepSeek saga or the likely disappointing 2025 sales numbers for the MI300 GPU:
"Believe it or not, it's not due to DeepSeek. We cut numbers already on January 6th on GPUs, and the stock actually went up 3%, so a guide down on disappointing MI300 sales for 2025 is already expected."
Instead, Reitzes asserts that Melius is now "more cautious on x86 server and PC over the long term for AMD," based on the conviction that "NVIDIA is going to increasingly 'come for them' in both markets [CPU and GPU] with their Arm-based CPUs that are optimized for accelerated PCs."
The analyst goes on to note:
"We are increasingly concerned that custom CPUs and Nvidia CPUs will cannibalize even more of the x86 server market long-term, even though AMD's current chip, Turin, is doing well."
Accordingly, Melius Research has reduced its target for AMD shares from $160 to $129, implying an upside potential of ~12 percent relative to the stock's current pre-market price of $115.25.
Bear in mind that HSBC recently noted that "AMD's AI GPU roadmap is less competitive than previously anticipated, limiting its penetration into the AI GPU market."
Also, Wolfe Research noted in December 2024 that "AMD won’t be in a position to guide AI for CY25 – which will in itself drive concerns."
BREAKING: President Trump announces the U.S. will be placing tariffs on all semi-conductors and pharmaceuticals imported from 🇹🇼Taiwan in the very near future pic.twitter.com/KGbMbT3tLd
— Financelot (@FinanceLancelot) January 27, 2025
Meanwhile, President Trump has now announced his intention to place tariffs on all semiconductors and pharmaceutical products from Taiwan. The move is intended to push TSMC towards localizing more of its production within the US.
Impact of $TSM tariffs to largest customers$AAPL $NVDA $QCOM are almost fully dependant & would see costs ⬆️ & margins/vol ⬇️ $AMD has the most to lose as a relatively small % of $INTC biz is at $TSM. $AMD would lose share on large parts of X86 client & enterprise server biz
— Mojo (@Mojo_flyin) January 28, 2025
Interestingly, should President Trump follow through on this threat, it would hurt AMD the most by reducing its market share in x86 client and enterprise server spheres. Intel would likely emerge as the sole winner from this upheaval.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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