In a fresh analyst note, Bank of America has downgraded AMD's shares to Neutral from Buy, cutting the firm's share price target to $155 from an earlier $180. BofA's adjustment is based on the belief that a broadening in the AI chip market will lead to greater demand for products from Marvel and Broadcom and limit AMD's ability to gain market share. Excessive demand for NVIDIA's GPUs, coupled with high prices, have spurred big tech companies to develop custom AI chips or seek to diversify their sources as they do not want to be left behind in building the infrastructure required to compute AI workloads.
BofA Believes AMD Will Face Tighter PC Market In 2025 Following Robust 2024 Growth
AMD's position in the chip design industry provides it with a one-of-a-kind business model where its two primary competitors are in two different industries. When it comes to x86 processors, AMD also benefits from being the only large-scale alternative available to Intel's products. In its latest note that reduces AMD's share price target to $155 from $180 and cuts the rating to Neutral from Buy, BofA is aware of this fact.
The bank shares that AMD's ability to capitalize on Intel's weakness, coupled with the ability to target the AI market, stands to enable the firm to grow its revenue by 15% to 20% annually. Yet, this is the only optimistic 'note' in BofA's coverage. The bank adds that the broadening out of the AI GPU market away from NVIDIA and towards firms such as Marvell and Broadcom stands to create competition for AMD.
Unlike the x86 CPU market which is dominated by Intel and AMD, the GPU and particularly the AI accelerator market is broader. Firms such as Marvell and Broadcom are emerging to be key players in this fast-growing sector.
According to BofA, NVIDIA's dominance in the AI accelerator market, coupled with the fact that cloud providers are also seeking custom chips from Marvell and Broadcom, constrain AMD's ability to operate in the AI industry. Marvell, in particular, has been aggressively pursuing custom AI processors.
During the firm's second-quarter earnings, management shared that these include "projects with a new Tier 1 AI customer we announced earlier this year, are also tracking well to key milestones." Marvell added that when it came to the firm's expected high teen data center market growth for fiscal Q3, "the largest contributor to this growth will be our AI custom silicon programs as they begin to ramp meaningfully in the third quarter."
Similarly, media reports have also claimed that Broadcom is working with OpenAI to enable the latter to develop custom AI GPUs to reduce reliance on NVIDIA's products. AWS provider Amazon made headlines earlier this year after announcing custom AI chips, while Google already uses TPUs for AI computing purposes.
BofA adds that while AMD's client PC sales grew by 40% half-over-half during H1 2024, this momentum can lead to a correlation in the first half of 2025. During H1 2024, AMD's Client business posted $2.86 billion in revenue, which was a 65% growth over H1 2023's figures. According to BofA, a PC market correction could slow down AMD next year. As a result, the bank reduced its 2026 price-to-earnings multiple for the firm to 28x and assigned it a $155 share price target.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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