MW AMD's stock gets downgraded, as a price war with Intel may be ahead

By Emily Bary

AMD's stock is 'relatively inexpensive' after its selloff but could struggle to find momentum if gross margins come under pressure, according to a KeyBanc analyst

A KeyBanc Capital Markets analyst fears Advanced Micro Devices Inc. could get caught up in a price war in the market for personal-computer chips.

That's one reason KeyBanc's John Vinh downgraded AMD's stock $(AMD)$ late on Monday, lowering his rating to sector weight from overweight.

AMD's stock is bucking the downgrade so far, up 1.6% in Tuesday's premarket trading as S&P 500 futures rise. The stock has fallen 31% so far in 2025.

Vinh worries that a price war in the market for PC central processing units could weigh on AMD's gross margins. "We believe AMD will be forced to react to [Intel's] aggressive price actions in the range of 20-40% on Lunar Lake in order to maintain/regain lost market share" to Intel, he wrote in his note to clients.

AMD's stock looks "relatively inexpensive" as it trades at 13 times KeyBanc's 2026 earnings estimates. But "semiconductor stocks rarely work with risk to [gross margins]," according to Vinh.

While AMD has been able to benefit from Intel Corp.'s $(INTC)$ struggles in recent years, Vinh thinks Intel's 18A manufacturing technology will help it "close the competitive gap with AMD." That means "it will be increasingly more difficult for AMD to gain additional share," especially in the server business, since AMD has a strong presence with cloud hyperscalers, he wrote.

His downgrade of AMD is one of a number this year, and the latest to warn of a potentially more competitive Intel.

See also: Should you buy the dip in tech? Veterans of the dot-com era share 5 ways to find winners.

Another potential issue involves the China market. AMD has adapted its artificial-intelligence accelerator to meet export restrictions to China, and demand has been increasing. But Vinh and his team are "increasingly concerned whether this is sustainable given concerns that further export restrictions will be levied by the U.S."

In general when it comes to artificial-intelligence accelerators, Vinh noted that Nvidia Corp. $(NVDA)$ "is so far ahead" with its own Blackwell offerings. AMD has completed its deal for ZT Systems, an AI company with expertise in servers and clusters, but Vinh and his team "think it will take some time for AMD to come out with a competitive response" to Nvidia.

Read: Nvidia's stock gets a rare downgrade, as there are bigger problems than tariffs

-Emily Bary

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April 08, 2025 09:33 ET (13:33 GMT)

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