Baird Equity Research has revised its outlook on Advanced Micro Devices (AMD) stock due to a slower adoption of its upcoming artificial intelligence (AI) chips. Analyst Tristan Gerra has reduced the price target for AMD to $125 per share, down from $170, while maintaining an Outperform rating for the stock.
Lowered Revenue Outlook for Data Centers
Gerra cites a lowered data center revenue outlook as the reason for reducing their estimates for 2024. He states that the original assumption for significant AI market share and ramp timing for the MI300 AI chip from AMD has been pushed out.
Competition with Nvidia in AI Software Tools
One of the main issues highlighted by the analyst is the lag behind AMD's main competitor, Nvidia, in terms of AI software tools and developer support for its chips. Nvidia's strong ecosystem, CUDA, has made its chips more popular among start-ups and corporations. The platform's extensive AI-related tools and software libraries have allowed developers to build AI applications rapidly.
AMD's Future in the AI Chip Market
Gerra predicts that by the end of 2024, AMD will only hold a 5% share of the AI chip market due to a lack of design wins thus far. However, it is worth noting that AMD stock has shown significant growth over the past year, with a 48% increase compared to a 34% rise in the iShares Semiconductor exchange-traded fund (SOXX), which tracks the ICE Semiconductor Index.
In conclusion, Baird Equity Research's revised outlook suggests a more cautious stance on AMD stock in light of the slower uptake for its AI chips. Analyst Tristan Gerra emphasizes the importance of catching up to Nvidia in terms of AI software tools and developer support to gain a larger market share in the AI chip industry.
