By Tae Kim

Chip maker Advanced Micro Devices might soon suffer from bloated chip inventory levels at retailers and distributors, Bernstein warns.

Industry shipments of central processing units, or CPUs, were 13% above PC shipments during the December quarter, analyst Stacy Ragson wrote -- citing his firm's analysis of various industry data sources, including IDC and Mercury Research. Historically, that has been a sign of too much inventory.

Rasgon reaffirmed his Market perform rating for AMD stock on Thursday and his $125 price target. In early trading Thursday, the stock was up 1.2% to $113.09.

In the past, the industry sent too much inventory into stores and distributors during the Covid-driven computer sales boom, which led to a big drop off in sales later.

"Once again, we are starting to see material overshipment in the CPU channel," he wrote. "The fact that we appear to be headed into yet another [overshipment cycle] one (after everything that has happened) makes us nervous, especially for AMD."

While it is possible AMD is gaining a lot of market share from its main competitor, Intel, to explain some of the overall industry data trends, it likely isn't enough, according to the analyst.

"Even with the AMD share gain story, it feels aggressive to assume the recent disparity is all due to product leadership," he wrote.

An AMD spokesperson pointed to CEO Lisa Su's recent earnings call remarks, saying AMD is focused on total revenue not the number of CPU unit shipments. She also said during the fourth-quarter call that AMD had record CPU sales and the company's CPUs dominated the best-selling rankings at many global retailers.

AMD stock has fallen about 34% over the past 12 months, versus the 8% rise in the iShares Semiconductor exchange-traded fund

Write to Tae Kim at tae.kim@barrons.com

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February 13, 2025 12:57 ET (17:57 GMT)

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