The shares of Advanced Micro Devices Inc (Nasdaq: AMD) saw a heavy sell-off in the market yesterday following reports of a rating downgrade by Blayne Curtis, an analyst at Barclays. Specifically, the chipmaker was downgraded to “equal weight” from “overweight” by Curtis on concerns over rising competition from players in PC and gaming markets. Following the downgrade, the stock lost 8.29% or $9.88 to end Wednesday’s trading session at $109.34. Notably, the stock of AMD shares has lost about 25% so far this year.
The analyst has also highlighted cyclical risk (in 2023) for the chip manufacturer in a number of distinct end-user industries. Despite the tough competition, as per the analyst, AMD is on course to increase its market share in both server and client segments.
Blayne Curtis also underlined rising challenges from semiconductor manufacturer Intel (INTC), which is expediting capital investment in brand-new foundries and innovations to fulfill demand in the coming times. Notably, under the chief executive officer Pat Gelsinger, Intel has expressed its interest to take over Tower Semiconductor (TSEM) for $5.40 billion and also ARM Holdings, the UK headquartered chip designer that was unsuccessful in concluding a $40 billion buyout by Nvidia (NVDA).
With regards to the latest takeover of Xilinx and the anticipated cyclical slowdown in the gaming and PC market, the analyst stated that “there seems to be no evidence of a downturn in any of the end-customer markets, but it’s obvious that all three sectors (gaming, PC, and ‘broader XLNX’) are running at above normal levels. The main question is what AMD’s expansion path will be after this probable pullback, and the result will be determined by the level of competitiveness of ARM and Intel in 2024-25.”
Based on the facts presented above, Curtis, while downgrading the stock of AMD, also slashed the price target to $115, from $148 issued earlier. Interestingly, the analyst reconfirmed Intel’s ‘underweight’ rating with a price target of $45.
The rating downgrade is expected to keep the stock of AMD range-bound with a slight bearish bias in the short term.
The historical price chart indicates that the stock of AMD has closed below its 50-day moving average, as shown in the image below. The Chaikin money flow indicator also has a negative reading. The next major support is anticipated only near the psychological level of 100. Therefore, we are anticipating the stock to decline further in the days ahead.
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