What Happened?
Shares of computer processor maker AMD (NASDAQ:AMD) fell 5.3% in the afternoon session after Bank of America analyst Vivek Arya downgraded the stock's rating from Buy to Neutral and lowered the price from $180 to $155. Arya warned that tech giants like Amazon, Microsoft, and Alphabet are leaning heavily on Nvidia's chips, signaling a strong risk that AMD could lose significant market share.
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What The Market Is Telling Us
AMD’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock gained 10.9% as chip and AI stocks surged alongside broader market gains, with the Nasdaq rising by 2.1%, the S&P 500 by 1.5%, and the Dow gaining 0.57% following Nvidia's outstanding earnings results. During its Q4'2024 earnings, Nvidia reported impressive top line results (7.6% revenue beat), big gross margin improvement, and EPS outperformance vs. Wall Street's estimates. Notably, revenue grew 265% year-on-year and 22% sequentially during the quarter. The strong top line performance was mostly driven by the data center segment, which was up 409% year-over-year and 27% sequentially as demand for Nvidia processors optimized for generative AI, LLMs (large language models), and other AI workloads continued to accelerate. The company estimated that roughly 40% of Data Center revenue was driven by AI-related applications. Guidance for the next quarter was also good, with revenue, gross margin, and implied operating profit coming in ahead of expectations.
Overall, Nvidia's strong performance during the quarter highlighted the growing demand for AI-related technology and demonstrated the abundant growth opportunity for innovators within the space.
AMD is down 5.7% since the beginning of the year, and at $130.66 per share, it is trading 38.2% below its 52-week high of $211.38 from March 2024. Investors who bought $1,000 worth of AMD’s shares 5 years ago would now be looking at an investment worth $3,356.
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