By Mackenzie Tatananni

Advanced Micro Devices risks losing its standing in the semiconductor space as rivals like Nvidia and Intel continue to make strides, according to analysts at KeyBanc Capital Markets.

Analysts led by John Vinh downgraded AMD to Sector Weight from Overweight and reiterated a $140 price target. Shares were up 0.4% to $83.93 in premarket trading Tuesday, lagging behind the broader market as futures tracking the S&P 500 and tech-heavy Nasdaq Composite rose 1.5% and 1.2%, respectively. The price target suggests potential upside of nearly 67%.

The analysts questioned the sustainability of AMD's artificial-intelligence business in China, given the possibility the U.S. levies additional export restrictions. And there are other concerns. "Excluding China, there is very little to no growth in AI GPUs this year," the analysts noted. With Nvidia focusing on its GB200 NVL exascale computer, the analysts believe the AI giant has further distanced itself from AMD, and "it will take some time for AMD to come out with a competitive response."

The team also highlighted increasing risk to AMD's gross margins, given a potential price war with Intel and limited opportunities to snap up market share. While AMD shares are relatively inexpensive, trading at 13 times the firm's 2026 earnings-per-share estimate, semi stocks "rarely work" as margins are pressured, the analysts wrote. As Intel makes progress on its 18A, its latest chip-making process, this will close the competitive gap with AMD in the server and PC markets, "which is going to make it increasingly difficult to gain share."

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 08, 2025 07:58 ET (11:58 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.