Advanced Micro Devices (NASDAQ:AMD) saw its shares fall more than 3% Monday as Northland Capital Markets analyst Gus Richard cut his rating on the chipmaker’s stock one day before it reports its third-quarter earnings results.
Prior to the market open, Richard lowered his view on AMD (AMD) to market perform from outperform, with a price target of $60 a share. Richard said, “The tide is turning” for AMD (AMD), and cited such factors a slow recovery in demand from China, and rising competition, as among the issues facing AMD (AMD) in the next few years.
Richard said ARM’s market share for central processing units [CPUs] will continue to grow “particularly in China,” and that Intel (INTC) will likely have better access to transistors in desktop CPUs next year, and laptop and server sales improve in 2024.
What Richard called “indigenous demand” in China has contracted sharply, and demand in servers has slowed to the point that there are multiple questions facing AMD (AMD) in the Chinese market.
“Is it due to a weakening economy, an inventory correction, Covid lockdowns, [or] market share gains by ARM?” Richard mentioned, in a research note about his downgrade.
Additionally, Richard said that the chip market is simply facing the aftereffects of PC and server demand being “pulled forward” during the Covid-19 pandemic, and that enterprises are now using the equipment they bought and just not needing to upgrade their operations.
Wall Street analysts and Seeking Alpha authors both currently have buy ratings on AMD’s (AMD) stock. Seeking Alpha’s quant system, which historically outperforms the stock market, has a hold rating on AMD’s shares.