AMD (NASDAQ:AMD) was cut to Outperform from Strong Buy at Raymond James on Tuesday, with analysts raising the firm's price target for the stock to $195 from $190 per share.
Analysts told investors that they are lowering their rating for the stock based on the elevated AI revenue expectations.
"MI300 ramps are in early stages, and we expect multiples to compress as revenue accelerates," analysts wrote. "We project AMD’s base business to earn $3.5-4 in 2025, which means AI GPUs will need to contribute >$3 EPS. That is equivalent to $12B revenue or 800k units."
"In comparison, we estimate NVDA shipped 2M units in CY23 and are projecting 3.2M units for CY25," analysts added. "While ~20% unit share is not impossible, we think it’s a little premature to give the benefit of the doubt. For context, AMD has <15% unit share in Gaming GPUs and ~25% share in Server CPUs,"
Overall, Raymond James' analysis suggests the stock is already discounting ~20% unit share for AI GPUs, which is closer to their bull case.