Investing.com -- Advanced Micro Devices shares dropped 1.7% in premarket trading Friday after Goldman Sachs (NYSE:GS) downgraded the stock from Buy to Neutral, citing underperformance and cyclical challenges.
The premarket slide follows a 4.3% decline in Wednesday’s session.
The rating shift comes as Goldman Sachs released its 2025 outlook for the Semiconductor and Semiconductor Capital Equipment sector, highlighting AMD (NASDAQ:AMD)'s struggles in key areas.
In their note, Goldman Sachs analysts stated that AMD “underperformed its peers...as the company fell short of heightened investor expectations in Data Center GPU and were impacted by cyclical headwinds in their Embedded (i.e., FPGA), Server CPU, and Gaming businesses."
This underperformance, coupled with broader industry challenges, led to the downgrade.
Goldman Sachs recommended investors focus on industry leaders in AI and cyclicals, which they believe are better positioned for 2025.
"We expect the magnitude of earnings beats in AI to moderate...while we envision earnings revisions in broad-based semiconductors to turn positive in the latter half of the year," the note explained.
The investment bank highlighted companies like NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Lam Research (NASDAQ:LRCX) as the buy-rated names in the sector, citing their robust positions in the AI and cyclical spaces.
The firm noted that the semiconductor sector had a mixed performance in 2024, with AI-focused companies like Credo Technology Group and NVIDIA outperforming, while traditional end-market players, including AMD, faced challenges.
Goldman Sachs noted, "The Semiconductor sector underperformed the broader market...driven by a moderation in performance in AI stocks and...persistent weakness in the Automotive (excl. China) and Industrial end-markets."