What to Expect From Advanced Micro Devices’ Upcoming Q4 Results?

AMD (NASDAQ:AMD) shares fell more than 2% pre-market today after HSBC analysts downgraded the stock to Reduce from Buy, slashing the price target nearly in half to $110 from $200. The move reflects concerns over AMD's competitive position in the AI GPU market and potential setbacks in its product roadmap.

The analysts highlighted tepid demand for AMD's new MI325 GPU and potential delays in the launch of a competitive AI rack solution as key factors limiting the company’s ability to gain ground against market leader Nvidia. This outlook led to a significant downward revision in AMD's fiscal 2025 AI GPU revenue projections, which were reduced from $12.3 billion to $8.1 billion—well below the market consensus of $9.5 billion.

While AMD’s share price has already declined 24% over the past three months, the analysts see further downside. They noted that AMD’s penetration into the AI GPU market is likely to be much weaker than previously expected, further weighing on its valuation.

The company’s product roadmap remains on track with the MI350 chip expected to launch in the second half of 2025. However, the analysts believe AMD’s ability to compete directly with Nvidia’s NVL rack platform will be delayed until late 2025 or early 2026, coinciding with the anticipated launch of the MI400.

Northland analysts reaffirmed an Outperform rating and a $175 price target for AMD (NASDAQ:AMD), highlighting the company’s strong position across AI GPUs, server CPUs, and PC clients. With headwinds in the embedded and gaming segments easing, AMD is set to deliver substantial growth through 2025.

AMD’s gains in the AI market are driven by its competitive roadmap and superior total cost of ownership (TCO). AI-related revenue is projected to surge to $9.5 billion in 2025, up from $5.2 billion, reflecting a 7% increase in the first half of the year compared to the second half of 2024. The ramp-up of AMD’s MI325X chip is expected to be a game-changer, offering hardware performance competitive with NVIDIA’s H200. While software remains a key challenge, AMD’s hardware advancements put it in a strong position for growth, according to the analysts.

In the server market, AMD continues to outpace Intel, with early indications showing its Turin CPUs outperform Granite Rapids in most workloads. Non-AI data center revenue is forecasted to grow by 26% year-over-year in 2024 to $7.7 billion, with an additional 10% growth projected in 2025. These estimates are considered conservative, leaving room for upside potential.

The PC client segment also offers a compelling growth story. With Microsoft ending support for Windows 10, an estimated 1.2 billion systems will need upgrading. AMD is poised to benefit, with approximately 40% of these systems, or 480 million units, expected to be replaced over the next 18 months. Despite elevated channel inventory in the PC market, AMD’s inventory levels are healthy, and spot shortages highlight robust demand for its products.

With leadership across key markets, a strong product pipeline, and favorable industry tailwinds, AMD is well-positioned for substantial upside, making it a top pick for 2025 at Northland.

Advanced Micro Devices (NASDAQ:AMD) shares fell nearly 2% pre-market today after Bank of America downgraded the company to Neutral from Buy, citing potential risks to its 2025 outlook. The firm also reduced its price target from $180 to $155 and cut its 2025/26 earnings estimates by 6% and 8%, respectively, reflecting a significant 13-23% gap from consensus projections.

Two key factors contributed to the downgrade. First, Bank of America expressed concerns over competitive pressures in the AI sector. NVIDIA and custom chip providers like Marvell and Broadcom were highlighted as major players that could hinder AMD’s market share growth in AI accelerators. The firm pointed to signals from Amazon, AMD’s largest cloud customer, which indicated a preference for custom solutions such as Trainium, Marvell, and NVIDIA products, limiting demand for AMD’s offerings. Similar trends were observed among other cloud giants like Google.

Bank of America projected that AMD would hold just 4% of the $200 billion AI accelerator market by 2025, far behind NVIDIA’s dominant share of over 80%.

The second concern centered on the potential for a correction in the PC processor market. AMD’s client PC sales had surged 40% in the latter half of 2024, but the firm anticipated a slowdown in the first half of 2025, which could challenge the company’s growth trajectory.

Despite these challenges, the note acknowledged AMD’s strong execution and its ability to capitalize on Intel’s ongoing restructuring issues, which provide opportunities for AMD to expand its market share in PC and server CPUs. Additionally, the company’s partnerships with Microsoft, Meta, and Oracle were viewed as strategic positives.

However, Bank of America tempered its outlook by emphasizing that AMD’s prospects in the AI sector remain limited, reducing the likelihood of the company exceeding Street estimates.

• Marjorie Taylor Greene has purchased shares in Advanced Micro Devices Inc (NASDAQ:AMD), a key player in the semiconductor industry.
• The outgoing Biden administration is planning to impose new restrictions on semiconductor exports to China, potentially impacting AMD and its competitors.
• AMD offers a more attractive investment opportunity compared to Nvidia, trading at 28 times forward earnings and positioned to benefit from AI growth.

On November 25, 2024, Marjorie Taylor Greene made a purchase of shares in Advanced Micro Devices Inc (NASDAQ:AMD). AMD is a prominent player in the semiconductor industry, competing with companies like Nvidia. The company is known for its microprocessors and graphics cards, which are integral to various computing applications.

The outgoing Biden administration plans to impose new restrictions on the export of semiconductor equipment and AI microchips to China. This move is expected to affect global chipmakers, including AMD and Nvidia, as highlighted by Proactive Investors. However, sources suggest these measures will be less stringent than initially proposed, potentially easing the impact on these companies.

Nvidia has seen a significant 180% increase in its stock this year, reaching a market cap of nearly $3.5 trillion. Despite this growth, Nvidia's high valuation of approximately 48 times the consensus FY2025 earnings may limit future gains. In contrast, AMD presents a more attractive investment opportunity, trading at 28 times forward earnings. This positions AMD to benefit from AI growth while offering better value to investors.

AMD's stock is currently experiencing a bearish trend, with its price at $142.68, below its five-day, 20-day, and 50-day EMAs. The 20-day SMA is at $141.97, and the 50-day SMA is at $153.29, indicating declining momentum. The stock is also trading below its 200-day SMA of $160.23, suggesting long-term bearish pressure.

Despite these challenges, there is potential for a short-term rebound. The eight-day SMA at $138.81 offers a slight bullish indication. However, the RSI of 46.42 remains neutral, indicating the stock is neither oversold nor overbought. Currently, AMD's stock price is $136.24, reflecting a decrease of 1.48, or approximately -1.07%.

Advanced Micro Devices (NASDAQ:AMD) reported third-quarter earnings that matched expectations, but shares fell more than 7% in after-hours trading as the company’s fourth-quarter revenue outlook came in below analyst estimates.

AMD posted adjusted earnings per share of $0.92 for Q3, in line with projections, while revenue reached $6.82 billion, surpassing the anticipated $6.71 billion and marking a 22% year-over-year increase. The strong results were driven by record sales of EPYC and Instinct data center products, alongside robust demand for Ryzen PC processors.

However, AMD’s Q4 revenue guidance, set at $7.5 billion plus or minus $300 million, fell short of investor hopes, with the midpoint below the Street estimate of $7.55 billion.

The Data Center segment was a bright spot, with revenue more than doubling year-over-year to $3.5 billion, while the Client segment saw a 29% rise, reaching $1.9 billion. In contrast, the Gaming segment experienced a steep 69% decline, with revenue dropping to $462 million, dampening overall growth momentum.

• Barclays reiterates its "Overweight" rating for NASDAQ:AMD, highlighting the company's strong position in the semiconductor industry.
• AMD's focus on AI and next-generation chips is expected to drive significant growth, with the TAM for AI accelerators projected to reach $800 billion by 2028.
• Despite challenges such as high valuation and potential competition from customers developing their own CPUs and GPUs, AMD's strategic investments in AI infrastructure are poised to enhance its market share and revenue.

On October 11, 2024, Barclays reiterated its "Overweight" rating for Advanced Micro Devices Inc (NASDAQ:AMD), maintaining its previous grade. At the time of this announcement, AMD's stock price was $167.08. AMD is a leading player in the semiconductor industry, known for its CPUs and GPUs. It competes with companies like Nvidia and Intel.

AMD has made significant strides in the tech industry, marked by strategic moves such as hiring Jim Keller and transitioning to TSMC for manufacturing. These efforts have bolstered AMD's market position. The company's latest GPUs are poised to compete directly with Nvidia's upcoming Blackwell series, which could potentially pressure Nvidia's profit margins while enhancing AMD's market performance.

AMD's recent "Advancing AI" presentation highlighted the impressive performance capabilities of its next-generation chips, which are crucial for sustaining the company's growth outlook. The company forecasts that the total addressable market (TAM) for AI accelerators will expand at a compound annual growth rate (CAGR) of 60% over the next five years, reaching $800 billion by 2028. This strategic focus on AI innovations reinforces AMD's trajectory towards a potential stock price of $200.

Despite these positive developments, AMD faces risks due to its high valuation and the possibility that customers might start developing their own CPUs and GPUs. This could impact the long-term demand for AI-related products. However, AMD's increasing involvement in various key areas of the AI infrastructure ecosystem, including software, hardware, and cluster-level systems, is expected to bolster its revenue share in the long term.

Currently, AMD's stock price is $167.68, reflecting an increase of 2.13% or $3.50. Today, the stock has fluctuated between a low of $163.01 and a high of $167.79. Over the past year, AMD's stock has reached a high of $227.30 and a low of $93.12. The company has a market capitalization of approximately $271.39 billion, with a trading volume of 24,377,529 shares on the NASDAQ.

NASDAQ:AMD's recent announcement to acquire ZT Systems for $4.9 billion marks a significant move aimed at bolstering its position in the artificial intelligence sector. This strategic acquisition is expected to enrich AMD's product offerings, potentially setting the stage for enhanced market competitiveness and growth. AMD, a key player in the semiconductor industry, competes with giants like Intel and NVIDIA, particularly in areas of CPUs and GPUs. This acquisition could provide AMD with a crucial edge in the rapidly evolving AI market.

The financial health of AMD, as reported for the recent quarter, showcases a company in a strong position to undertake such a substantial acquisition. With net cash provided by operating activities reaching $593 million, AMD demonstrates robust operational efficiency. This financial metric is crucial as it indicates the company's ability to generate cash from its core business operations, which is essential for supporting expansion and strategic investments like the acquisition of ZT Systems.

However, AMD's financial activities also highlight its prudent approach to managing its resources. The company's investment activities accounted for an outflow of $386 million, with capital expenditures of $154 million. This level of spending on investing activities is indicative of AMD's commitment to fostering growth and innovation. Moreover, the financing activities leading to a net cash outflow of $1.056 billion, primarily due to debt repayment of $750 million, reflect AMD's strategic focus on strengthening its balance sheet by reducing liabilities.

Despite these significant cash outflows, AMD managed to maintain a strong liquidity position, ending the period with $3.962 billion in cash. This slight decrease in working capital by $608 million, when viewed in the context of its acquisition plans and debt repayment, underscores AMD's effective financial management and strategic planning capabilities.

The acquisition of ZT Systems, therefore, is not just a strategic move to enhance AMD's portfolio in artificial intelligence but also a testament to the company's solid financial foundation and its ability to pursue growth opportunities. With a clear focus on expanding its technological capabilities and maintaining a healthy financial status, AMD is well-positioned to navigate the competitive landscape of the semiconductor industry.