AMD: Downgrading To Sell, Only AI Fumes Here

Seekingalpha2023-09-11

We are downgrading Advanced Micro Devices to a sell. We are now less optimistic about AMD because we think Wall Street expectations for AI revenue are too high.We expect AMD's AI GPU to lag behind ...

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PandaEyes
·2023-09-11
insinuating a shorting environment? [Thinking]
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We are now less optimistic about AMD because we think Wall Street expectations for AI revenue are too high.We expect AMD's AI GPU to lag behind ...</p>\n\n<a href=\"https://seekingalpha.com/article/4633963-amd-downgrading-to-sell-only-ai-fumes-here\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"AMD","symbol_name":"美国超微公司","start_time":0,"source_url":"https://seekingalpha.com/article/4633963-amd-downgrading-to-sell-only-ai-fumes-here","article_id":"2365782363","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2365782363","pubTimestamp":1694415874,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"We are downgrading Advanced Micro Devices to a sell. 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We are now less optimistic about AMD because we think Wall Street expectations for AI revenue are too high.We expect AMD's AI GPU to lag behind Nvidia Corporation in a material way, and we now see a higher risk profile for the stock in the near-to-mid term.Additionally, we also believe the industry spending shift to AI will have a negative effect on its data center CPU business.We believe investors will soon come to the realization that AMD won't be the next Nvidia.The stock is up 67% YTD, outperforming the S&P 500 by 50%, and we recommend investors take profits and revisit the stock at a lower level.We're downgrading Advanced Micro Devices, Inc. (NASDAQ: AMD) to a sell. We're less optimistic about AMD as we think Wall Street expectations for A.I. revenue are too high now and continue to expect AMD's A.I. GPU offerings to lag behind Nvidia Corporation (NVDA) after the global tech conferences this month. We see AMD underperforming into 2024 and recommend investors take advantage of the YTD rally and sell.We expected investors to turn more positive on AMD due to signs of PC recovery and potential A.I. growth exposure. We now see our negative thesis playing out sooner than expected and see AMD underperforming A.I.-related revenue growth expectations. AMD is up 67% YTD, outperforming the S&P 500 by around 50%. The stock is up 30% over the past six months but down 8% over the past month, underperforming the S&P 500 (SP500), Intel Corporation (INTC), and NVDA. We think investors will wake up to the reality that AMD won't be the next NVDA soon and recommend exploring exit points out of the stock ahead.The following graph outlines the stock's performance against the peer group and the S&P 500 over the past month.YChartsAMD presented at the Deutsche Bank 2023 Technology Conference late last month and earlier this week at the Goldman Sachs Communacopia + Technology Conference - Management continued to push the narrative of A.I. growth exposure, mixed data center demand, and sequential recovery in the PC market. We think AMD has talked the talk so well that now A.I.-related expectations are too high, and AMD won't be able to keep up in 2H23. We expect AMD to underperform due to two factors: First, the company's A.I. GPU offerings are not the best in the market, and the majority of cloud customer dollars spent will favor NVDA, and second, AMD's CPU sales will likely be hurt by increased industry adoption of A.I. servers over traditional compute servers. We expect the capex optimization and industry spending shift to A.I. will have a negative effect on its data center CPU business.Additionally, management comments in response to concerns about the \"shift in wallet share, if you will, away from traditional servers to acceleration\" were guarded, stating, \"Lots of workloads will continue to require CPUs. And general purpose compute will continue to be important.\" While this is true, under a limited cloud capex, we're seeing more non-A.I.-related cost cuts and expect this, combined with the higher ASP of A.I. servers, to harm AMD's data center business. The server total addressable market (\"TAM\") for 2023 is expected to drop 17% Y/Y, but the A.I. server TAM is expanding rapidly.The following graph outlines global historical server shipment volumes and forecasts.DigiTimesNot the next NVDA: Expectations are too highWe think AMD won't be able to match NVDA's growth rate and continue to believe AMD's A.I. accelerator offerings, MI300 series (even with the release of MI300X), won't materially boost the company's A.I. revenues. We don't think AMD's MI300 A and X families will bring any differentiation versus their primary competitor. While we acknowledge AMD's diversified portfolio of GPUs, CPUs, and FPGAs, we don't expect the stock to experience outperformance in the near term.ValuationAMD is overvalued; the stock is trading at a high valuation but is underperforming the peer group in 2H23. The stock is trading at 7.6x EV/C2023 sales versus the peer group average of 5.9x. On a P/E basis, the stock is trading at 39.7x C2023 EPS $2.76 compared to the peer group average of 30.6x.The following chart outlines AMD's valuation against the peer group.TSPWord on Wall StreetWall Street maintains an overwhelming bullish sentiment on the stock. Of the 48 analysts covering the stock, 34 are buy-rate, 13 are hold-rated, and the remaining are sell-rated. We think Wall Street is slowly shifting away from the AMD A.I. growth story, but the stock is currently a favorite in the semi space due to hopes of rivaling NVDA.The stock is currently priced at $109 per share. The median sell-side price target is $140, while the mean is $138, with a potential upside of 26-28%.The following charts outline AMD's sell-side ratings and price targets.TSPWhat to do with the stockWe're downgrading AMD stock to a sell. We now see a higher risk profile for Advanced Micro Devices, Inc. into 2024; Wall Street expectations for A.I. revenue are too high for AMD. Additionally, we believe the industry spending shift to A.I. will have a negative impact on the data center CPU business. We recommend investors take advantage of the YTD rally and take profits at current levels.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[{"id":218784036774080,"gmtCreate":1694439793034,"gmtModify":1694439797661,"author":{"id":"4099020730670950","authorId":"4099020730670950","name":"PandaEyes","avatar":"https://static.tigerbbs.com/a7bab6c039b2d7b334f21626cfada364","vip":1,"crmLevel":8,"crmLevelSwitch":1},"htmlText":"&nbsp;insinuating a shorting environment?&nbsp;[Thinking]&nbsp;","listText":"&nbsp;insinuating a shorting environment?&nbsp;[Thinking]&nbsp;","text":"insinuating a shorting environment? 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