Advanced Micro Devices' (AMD) potential to gain market share is limited by higher competitive risks in artificial intelligence against Nvidia's (NVDA) "dominance" and increasing cloud preference for custom chips from Marvell Technology (MRVL) and Broadcom (AVGO), BofA Securities said Monday.
The brokerage reduced its 2025 AI graphics processing unit outlook for AMD to about $8 billion from $8.9 billion previously, compared with the market consensus of $9.6 billion.
The company's pipeline continues to be behind by more than a year versus Nvidia and it lacks a "competitive" networking portfolio, BofA analyst Vivek Arya said in a note to clients. "Recently, [the] largest cloud customer Amazon.com (AMZN), strongly indicated its preference for alternative custom and [Nvidia] products, but a lack of strong demand for AMD," the analyst added.
BofA said it continues to appreciate AMD's "consistent execution," tailwinds from ongoing issues at rival Intel (INTC), and AMD's participation in the expanding AI market that can help sustain a sales growth trajectory between 15% and 20%.
The firm reduced its 2025 pro forma per-share earnings estimate for AMD by about 6% to $4.43 and its 2026 outlook by 8% to $5.51, compared with market consensus for $5.09 and $7.11, respectively.
BofA downgraded its rating on the AMD stock to neutral from buy and reduced its price objective to $155 from $180.
The company's shares were down 4.6% in recent trading.
Price: 132.29, Change: -6.30, Percent Change: -4.55
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