Shares of Advanced Micro Devices (AMD, Financial) dipped 4% on Monday after Bank of America downgraded Advanced Micro Devices from Buy to Neutral, citing headwinds in the PC sector into 2025 and challenges in the AI accelerator market. In addition, AMD's price target was cut to $155 from $180, and the firm's 2025 and 2026 EPS estimates were also cut by 6% and 8%, respectively, while keeping a 13% to 23% gap versus consensus.

• Warning! GuruFocus has detected 6 Warning Signs with AMD.

The research note emphasized increasing competitive pressures from NVIDIA (NVDA, Financial) Among custom chipmakers, companies like Marvell Technology (MRVL, Financial), and Broadcom (AVGO, Financial). A key factor is AMD's limited traction with major cloud providers. As Bank of America stated, "Amazon (AMZN, Financial) strongly indicated its preference for alternative custom (Trainium/MRVL) and NVDA products." In 2025, only 4% of the $200 billion AI accelerator market is expected to be controlled by AMD with NVIDIA having the dominant 80+% share.

Secondly, a market correction in the PC processor market was flagged by concerns over a potential market in the first half of 2025. A robust 40% half-on-half surge in AMD's client PC sales in late 2024, which brought its year earnings estimate in line, is apparently slowing, dragging on growth, Bank of America warns.

Despite the downgrade, the firm acknowledged AMD's opportunities to gain market share amid Intel's restructuring challenges and its strong partnerships with Microsoft (MSFT, Financial) and Meta (META, Financial), But it remains tempered by limited upside potential in AI.