(Bloomberg / Ryan Vlastelica) — Advanced Micro Devices Inc. is falling further behind Nvidia Corp. in its technological capabilities, a fact that could continue to pressure the stock, according to Jefferies, which downgraded the chipmaker to hold.
“AMD has considerable ground to cover before their products can compete,” wrote analyst Blayne Curtis, who previously had a buy rating on the stock. Nvidia’s chips have “a significant performance advantage” over AMD’s, and this gap should widen further with Nvidia’s upcoming product cycles, a sign of AMD’s “limited traction in AI.”
Shares fell 3.6% on Thursday and are down about 50% from a peak hit about a year ago. However, its year-to-date decline of 12% is milder than Nvidia’s 17% drop.
Even with the slump in AMD shares, Jefferies wrote, “Street estimates still seem too high, and we see more downside risk than upside potential near-term.”
In its most recent results, AMD gave a disappointing outlook for its data center business, a sign of how it is struggling to catch up to Nvidia. Including Jefferies, at least eight firms have lowered their view on AMD this year. Some, including HSBC and Melius, have specifically cited the difficulty of competing with Nvidia.
Jefferies cut its price target on the stock from $135 to $120, putting it among the lowest targets of the analysts tracked by Bloomberg. The average target is about $145; AMD last closed at $110.19.
Nvidia is by far the biggest player for chips used in artificial intelligence processing, claiming about 89% of worldwide server GPU unit shipments, according to data from IDC that goes through the third quarter of last year. In contrast, AMD has 10.3% market share, with Intel Corp. at 1.1%.
While Intel is well in last place, aggressive changes being made at the one-time industry leader suggests a potential “brighter future,” Curtis wrote, adding that “expectations for mounting competition from Intel” could be an additional risk to AMD.
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