Only Room For The Best Or Cheapest, And AMD Is Neither: Downgrading To Sell

Seeking Alpha01-09

SummaryWe're downgrading Advanced Micro Devices, Inc. to Sell as CES 2025 confirmed our belief that the company continues to lag Nvidia in the AI design win cycle.We had expected an intra quarter ...

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Guavaxf30
01-09
Guavaxf30
Actually, not just AMD. The magic bubble may be popping for many of the bull run stocks. Namely, Tesla, MSTR, RGTI, SMCI, etc.

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The DigiTimes report on t","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"AMD":"美国超微公司"},"translate_title":"只有最好或最便宜的空间，而AMD两者都不是：降级出售","themeId":"4616d9d71b071da3c7f32825f463a6f4","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMD":1.1},"content_text":"SummaryWe're downgrading Advanced Micro Devices, Inc. to Sell as CES 2025 confirmed our belief that the company continues to lag Nvidia in the AI design win cycle.We had expected an intra quarter trade for AMD after AI expectations got tampered last quarter, but we no longer believe this to be the case.AMD is not the best nor the cheapest solution, and hence we see little room for it to compete meaningfully.AMD's premium multiples are also unjustified at current levels, in our opinion.Our take is that investors should take advantage of the post-CES boost in investor confidence and explore windows out of the stock.We're taking our Buy rating away from Advanced Micro Devices, Inc. stock. AMD is largely regarded as the second-largest player in the AI accelerator market with an estimated 5-7% of the market, after Wall Street AI darling Nvidia (NVDA), who actually takes the crown with north of 90% of the market.We're downgrading AMD to a sell. The CES 2025 held earlier this week confirmed our belief that the odds are not in AMD's favor when it comes to AI. While AMD is improving its hardware/software offerings, it continues to lag Nvidia in the design cycle win. We expect the bulk of cloud capital expenditure (capex) spent from hyperscalers (i.e., Microsoft, Google, Amazon, and Meta Platforms) to favor Nvidia over AMD. If the past two years have told us anything, it's that when it comes to AI, there is no room for almost good enough, only room for perfect. We expect perfect refers to either Nvidia's next-gen Blackwell series or custom AI in-house ASIC, with little room left for AMD to meaningfully compete; something we don't think Wall Street is factoring for.Our logic -We had upgraded AMD to a buy in late October on our belief that the company's AI outlook got tampered with after its 3Q24 report guided for a softer-than-expected Q4 outlook and trailed whisper numbers (for reference, whisper numbers are the unofficial/unpublished forecasts circulated on Wall Street). The company guided AI GPU sales of $5B versus expectations of $6B. We had expected a window for an intra-quarter trade based on AMD stock's history of trading higher between quarters. The stock is now down ~12% since our upgrade, and we no longer see a window for that trade, and believe expectations are once again getting ahead of themselves.Hence, we revert to our negative thesis on AMD lacking material upside to current AI growth expectations. We believe Monday's CES presentations confirmed that AMD continues to be behind Nvidia in the AI design cycle race, and it'll pay the price with less cloud capex dollars spent on its offerings.Why AMD's CES 2025 didn't give us chills?Lisa Su-led AMD put a lot on the table at CES 2025 specifically regarding offerings to support “gaming, AI-enhanced PCs, and enterprise-level applications,” with Ryzen 9000X3D processor series, Ryzen 9000HX, 9000HX3D processors, and the Radeon RX 9000 graphics card lineup among others. The DigiTimes report on the CES presentation places Ryzen 9 9950X3D as the highlight, built on Zen 5 architecture with a 16-core design (AMD's most powerful processor to date). There was also a lot of excitement around next-gen Ryzen AI 300 series processors that are centered towards AI PCs, specifically Copilot+ PCs.These are all positives, particularly with AI PC moment expected to come to fruition in 2H25, on what we believe to be three factors: 1. Microsoft Windows 10 EOL (End of Life) up in October, a more favorable interest rate environment, and PC refresh cycle from enterprise in that healthier backdrop. Canalys data already showed that AI-capable PC shipments are gaining some momentum, accounting for 20% of all PC shipments during 3Q24 at 13.3M units. With that in mind, this doesn't mean much to AMD's near-term top-line growth, in our opinion. Canalys' Ishan Dutt noted:Despite the positive momentum, significant work must still be done to convince both channel partners and end customers of the benefits of AI-capable PCs.On the server front, AMD is also reeling in excitement with a current server market share of 24.2% in 3Q24, up from 23.3% in a year ago quarter. The company is faring better than its close competitor, Intel (INTC), which has been struggling to boost investor confidence.We see more favorable windows to exit the stock as excitement around AMD's position post-CES picks up. The showcased lineup definitely did well to excite AMD bulls, with the stock trading up 5% over the past five days, outperforming the S&P 500 up ~1% but still trailing big brother Nvidia, up ~11% during the same period.What most investors didn't catch is what was missing from AMD's CES presentation on Monday: its next-gen RDNA 4 GPUs, which were not mentioned at all. Tom's Hardware investigated this further in a meeting with AMD executives David McAfee and Frank Azor, where it was explained that:“the keynote was only 45 minutes long, and with a slew of other products to announce, the company simply couldn't dedicate enough time in the presentation to the new GPUs to correctly frame the product.”While time might have been an issue, we don't think it was the only one, and Paul Alcorn from Tom's Hardware shares our sentiment. The other looming factor, in our opinion, was that Nvidia stole the show and the pressure of announcing against Nvidia. We think this confirms that AMD continues to compete in the shadow of Nvidia to an extent.Why does Nvidia matter when looking at AMD?Nvidia informs our negative thesis on AMD because the former's dominance is a big part of why we think AMD will have less of a role to play within AI for now. Nvidia took part in Monday's CES with a keynote speech by CEO Jensen Huang. Compared to AMD's presentation, Nvidia's showed more muscle, in our opinion, confirming what the market is calling its “enormous technology lead” over the peer group with new AI tech around autonomous tech, PCs, and robotics (one of which was Nvidia Cosmos, the first-ever physical AI model to be used to boost robotic performance).The company also introduced a new AI super chip that is “a pint-sized version of its high-powered GB200 platform.” It is called GB10, based on GB200, and is touted as part of a desktop called Project DIGITS. For now, we know that the big hyperscaler players, plus the tier 2 guys (which include Oracle Tesla, among others), are racing to get their hands on this new chip. Why does this matter when discussing AMD? Pegging AMD's AI strides against those of Nvidia, it becomes clear that 1. Nvidia continues to dominate the market, and 2. AMD continues to lag when pitched against this dominant player in terms of innovation. Nvidia is now effectively tapping into what is estimated to be a $1T market opportunity around robotics and autonomous technology. Nvidia is now positioned to hit a market cap of $5T by mid-2026, while AMD is still working to compete with Nvidia's already-out products.Another factor to consider here, in our opinion, is that AMD does not hold pricing power in the world of AI accelerators; it is not the best nor the cheapest product out there. We believe Nvidia is the best for now, despite some teething overheating issues and concerns over energy consumption issues. The cheapest is the in-house ASIC spearhead by Microsoft, Google, Meta, and Amazon in appliance with Marvell (MRVL) and Broadcom (AVGO). We think this increases AMD's risk profile.ValuationAMD's premium multiples are also part of why we're less excited about the company; we're less confident that AMD will be able to match, let alone beat, the earnings growth the market is pricing in. The stock trades substantially higher than the semi peer group average at an EV/Sales of 8.56x versus the group average of 3.62x. We think the higher multiple isn't justified despite the milestones announced at CES, particularly considering the concerning trend of 35 downward earning revisions versus six upward ones over the past six-months. This comes in contrast to Nvidia, which has seen 43 upward earning revisions and 46 revenue revisions over the past three months alone.Wall Street is bullish on the stock. Of the 54 analysts covering the stock, 43 are buy-rated and the remaining are hold-rated. The stock price is currently at $129 per share with a median and mean price target of $180 and $182, respectively, for a whopping 39-41% potential upside. We don't expect AMD to fulfill that upside in 1H25; instead, we think the market is getting ahead of itself once again on its AI-related expectations for AMD.The following chart outlines AMD's sell side ratings and price targets.TechStockProsWhat to do with the stock?AMD is getting more attention now after it announced its expanded consumer and commercial AI PC portfolio at CES. While that is positive and will likely allow for an expanded share of the market against the likes of Intel, it doesn't necessarily translate to material outperformance, in our opinion. We think the new AI PC portfolio won't make up for what AMD lacks in overall design wins against rival Nvidia in the AI accelerator market. This puts it at a higher risk of underperforming, particularly considering how hot Wall Street's AI-related expectations can get. We think investor money would be better positioned elsewhere for 2025.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":390544720187832,"gmtCreate":1736393870815,"gmtModify":1736393875866,"author":{"id":"3576140222331577","authorId":"3576140222331577","name":"Guavaxf30","avatar":"https://static.tigerbbs.com/1ff15ff6aa254c9130f9af922f7e2447","vip":1,"crmLevel":9,"crmLevelSwitch":1,"idStr":"3576140222331577","authorIdStr":"3576140222331577"},"htmlText":"Actually, not just AMD. The magic bubble may be popping for many of the bull run stocks.&nbsp; Namely, Tesla, MSTR, RGTI, SMCI, etc.","listText":"Actually, not just AMD. The magic bubble may be popping for many of the bull run stocks.&nbsp; Namely, Tesla, MSTR, RGTI, SMCI, etc.","text":"Actually, not just AMD. The magic bubble may be popping for many of the bull run stocks. Namely, Tesla, MSTR, RGTI, SMCI, etc.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/390544720187832","repostId":1156446294,"repostType":2,"repost":{"id":"1156446294","kind":"news","pubTimestamp":1736391263,"share":"https://ttm.financial/m/news/1156446294?lang=&edition=fundamental","pubTime":"2025-01-09 10:54","market":"us","language":"en","title":"Only Room For The Best Or Cheapest, And AMD Is Neither: Downgrading To Sell","url":"https://stock-news.laohu8.com/highlight/detail?id=1156446294","media":"Seeking Alpha","summary":"Lisa Su-led AMD put a lot on the table at CES 2025 specifically regarding offerings to support “gaming, AI-enhanced PCs, and enterprise-level applications,” with Ryzen 9000X3D processor series, Ryzen 9000HX, 9000HX3D processors, and the Radeon RX 9000 graphics card lineup among others. The DigiTimes report on t","content":"<html><head></head><body><h2 id=\"id_1653304383\">Summary</h2><ul style=\"\"><li><p>We&#39;re downgrading Advanced Micro Devices, Inc. to Sell as CES 2025 confirmed our belief that the company continues to lag Nvidia in the AI design win cycle.</p></li><li><p>We had expected an intra quarter trade for AMD after AI expectations got tampered last quarter, but we no longer believe this to be the case.</p></li><li><p>AMD is not the best nor the cheapest solution, and hence we see little room for it to compete meaningfully.</p></li><li><p>AMD&#39;s premium multiples are also unjustified at current levels, in our opinion.</p></li><li><p>Our take is that investors should take advantage of the post-CES boost in investor confidence and explore windows out of the stock.</p></li></ul><p>We&#39;re taking our Buy rating away from <a href=\"https://laohu8.com/S/AMD\">Advanced Micro Devices, Inc.</a> stock. AMD is largely regarded as the second-largest player in the AI accelerator market with an estimated 5-7% of the market, after Wall Street AI darling Nvidia (NVDA), who actually takes the crown with north of 90% of the market.</p><p>We&#39;re downgrading AMD to a sell. The CES 2025 held earlier this week confirmed our belief that the odds are not in AMD&#39;s favor when it comes to AI. While AMD is improving its hardware/software offerings, it continues to lag Nvidia in the design cycle win. We expect the bulk of cloud capital expenditure (capex) spent from hyperscalers (i.e., Microsoft, Google, Amazon, and Meta Platforms) to favor Nvidia over AMD. If the past two years have told us anything, it&#39;s that when it comes to AI, there is no room for almost good enough, only room for perfect. We expect perfect refers to either Nvidia&#39;s next-gen Blackwell series or custom AI in-house ASIC, with little room left for AMD to meaningfully compete; something we don&#39;t think Wall Street is factoring for.</p><h2 id=\"id_574308238\">Our logic -</h2><p>We had upgraded AMD to a buy in late October on our belief that the company&#39;s AI outlook got tampered with after its 3Q24 report guided for a softer-than-expected Q4 outlook and trailed whisper numbers (for reference, whisper numbers are the unofficial/unpublished forecasts circulated on Wall Street). The company guided AI GPU sales of $5B versus expectations of $6B. We had expected a window for an intra-quarter trade based on AMD stock&#39;s history of trading higher between quarters. The stock is now down ~12% since our upgrade, and we no longer see a window for that trade, and believe expectations are once again getting ahead of themselves.</p><p>Hence, we revert to our negative thesis on AMD lacking material upside to current AI growth expectations. We believe Monday&#39;s CES presentations confirmed that AMD continues to be behind Nvidia in the AI design cycle race, and it&#39;ll pay the price with less cloud capex dollars spent on its offerings.</p><h2 id=\"id_2100356730\">Why AMD&#39;s CES 2025 didn&#39;t give us chills?</h2><p>Lisa Su-led AMD put a lot on the table at CES 2025 specifically regarding offerings to support “gaming, AI-enhanced PCs, and enterprise-level applications,” with Ryzen 9000X3D processor series, Ryzen 9000HX, 9000HX3D processors, and the Radeon RX 9000 graphics card lineup among others. The DigiTimes report on the CES presentation places Ryzen 9 9950X3D as the highlight, built on Zen 5 architecture with a 16-core design (AMD&#39;s most powerful processor to date). There was also a lot of excitement around next-gen Ryzen AI 300 series processors that are centered towards AI PCs, specifically Copilot+ PCs.</p><p>These are all positives, particularly with AI PC moment expected to come to fruition in 2H25, on what we believe to be three factors: 1. Microsoft Windows 10 EOL (End of Life) up in October, a more favorable interest rate environment, and PC refresh cycle from enterprise in that healthier backdrop. Canalys data already showed that AI-capable PC shipments are gaining some momentum, accounting for 20% of all PC shipments during 3Q24 at 13.3M units. With that in mind, this doesn&#39;t mean much to AMD&#39;s near-term top-line growth, in our opinion. Canalys&#39; Ishan Dutt noted:</p><blockquote><p>Despite the positive momentum, significant work must still be done to convince both channel partners and end customers of the benefits of AI-capable PCs.</p></blockquote><p>On the server front, AMD is also reeling in excitement with a current server market share of 24.2% in 3Q24, up from 23.3% in a year ago quarter. The company is faring better than its close competitor, Intel (INTC), which has been struggling to boost investor confidence.</p><p>We see more favorable windows to exit the stock as excitement around AMD&#39;s position post-CES picks up. The showcased lineup definitely did well to excite AMD bulls, with the stock trading up 5% over the past five days, outperforming the S&amp;P 500 up ~1% but still trailing big brother Nvidia, up ~11% during the same period.</p><p>What most investors didn&#39;t catch is what was missing from AMD&#39;s CES presentation on Monday: its next-gen RDNA 4 GPUs, which were not mentioned at all. Tom&#39;s Hardware investigated this further in a meeting with AMD executives David McAfee and Frank Azor, where it was explained that:</p><blockquote><p>“the keynote was only 45 minutes long, and with a slew of other products to announce, the company simply couldn&#39;t dedicate enough time in the presentation to the new GPUs to correctly frame the product.”</p></blockquote><p>While time might have been an issue, we don&#39;t think it was the only one, and Paul Alcorn from Tom&#39;s Hardware shares our sentiment. The other looming factor, in our opinion, was that Nvidia stole the show and the pressure of announcing against Nvidia. We think this confirms that AMD continues to compete in the shadow of Nvidia to an extent.</p><h2 id=\"id_1557623815\">Why does Nvidia matter when looking at AMD?</h2><p>Nvidia informs our negative thesis on AMD because the former&#39;s dominance is a big part of why we think AMD will have less of a role to play within AI for now. Nvidia took part in Monday&#39;s CES with a keynote speech by CEO Jensen Huang. Compared to AMD&#39;s presentation, Nvidia&#39;s showed more muscle, in our opinion, confirming what the market is calling its “enormous technology lead” over the peer group with new AI tech around autonomous tech, PCs, and robotics (one of which was Nvidia Cosmos, the first-ever physical AI model to be used to boost robotic performance).</p><p>The company also introduced a new AI super chip that is “a pint-sized version of its high-powered GB200 platform.” It is called GB10, based on GB200, and is touted as part of a desktop called Project DIGITS. For now, we know that the big hyperscaler players, plus the tier 2 guys (which include Oracle Tesla, among others), are racing to get their hands on this new chip. Why does this matter when discussing AMD? Pegging AMD&#39;s AI strides against those of Nvidia, it becomes clear that 1. Nvidia continues to dominate the market, and 2. AMD continues to lag when pitched against this dominant player in terms of innovation. Nvidia is now effectively tapping into what is estimated to be a $1T market opportunity around robotics and autonomous technology. Nvidia is now positioned to hit a market cap of $5T by mid-2026, while AMD is still working to compete with Nvidia&#39;s already-out products.</p><p>Another factor to consider here, in our opinion, is that AMD does not hold pricing power in the world of AI accelerators; it is not the best nor the cheapest product out there. We believe Nvidia is the best for now, despite some teething overheating issues and concerns over energy consumption issues. The cheapest is the in-house ASIC spearhead by Microsoft, Google, Meta, and Amazon in appliance with Marvell (MRVL) and Broadcom (AVGO). We think this increases AMD&#39;s risk profile.</p><h2 id=\"id_3708542456\">Valuation</h2><p>AMD&#39;s premium multiples are also part of why we&#39;re less excited about the company; we&#39;re less confident that AMD will be able to match, let alone beat, the earnings growth the market is pricing in. The stock trades substantially higher than the semi peer group average at an EV/Sales of 8.56x versus the group average of 3.62x. We think the higher multiple isn&#39;t justified despite the milestones announced at CES, particularly considering the concerning trend of 35 downward earning revisions versus six upward ones over the past six-months. This comes in contrast to Nvidia, which has seen 43 upward earning revisions and 46 revenue revisions over the past three months alone.</p><p>Wall Street is bullish on the stock. Of the 54 analysts covering the stock, 43 are buy-rated and the remaining are hold-rated. The stock price is currently at $129 per share with a median and mean price target of $180 and $182, respectively, for a whopping 39-41% potential upside. We don&#39;t expect AMD to fulfill that upside in 1H25; instead, we think the market is getting ahead of itself once again on its AI-related expectations for AMD.</p><p>The following chart outlines AMD&#39;s sell side ratings and price targets.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/c9138cb9183bb072c1fa15371450292d\" alt=\"TechStockPros\" title=\"TechStockPros\" tg-width=\"564\" tg-height=\"268\"/><span>TechStockPros</span></p><h2 id=\"id_2747352643\">What to do with the stock?</h2><p>AMD is getting more attention now after it announced its expanded consumer and commercial AI PC portfolio at CES. While that is positive and will likely allow for an expanded share of the market against the likes of Intel, it doesn&#39;t necessarily translate to material outperformance, in our opinion. We think the new AI PC portfolio won&#39;t make up for what AMD lacks in overall design wins against rival Nvidia in the AI accelerator market. This puts it at a higher risk of underperforming, particularly considering how hot Wall Street&#39;s AI-related expectations can get. We think investor money would be better positioned elsewhere for 2025.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Only Room For The Best Or Cheapest, And AMD Is Neither: Downgrading To Sell</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nOnly Room For The Best Or Cheapest, And AMD Is Neither: Downgrading To Sell\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-01-09 10:54 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4748350-only-room-for-the-best-or-cheapest-and-amd-is-neither-downgrading-to-sell><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryWe're downgrading Advanced Micro Devices, Inc. to Sell as CES 2025 confirmed our belief that the company continues to lag Nvidia in the AI design win cycle.We had expected an intra quarter ...</p>\n\n<a href=\"https://seekingalpha.com/article/4748350-only-room-for-the-best-or-cheapest-and-amd-is-neither-downgrading-to-sell\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AMD":"美国超微公司"},"source_url":"https://seekingalpha.com/article/4748350-only-room-for-the-best-or-cheapest-and-amd-is-neither-downgrading-to-sell","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1156446294","content_text":"SummaryWe're downgrading Advanced Micro Devices, Inc. to Sell as CES 2025 confirmed our belief that the company continues to lag Nvidia in the AI design win cycle.We had expected an intra quarter trade for AMD after AI expectations got tampered last quarter, but we no longer believe this to be the case.AMD is not the best nor the cheapest solution, and hence we see little room for it to compete meaningfully.AMD's premium multiples are also unjustified at current levels, in our opinion.Our take is that investors should take advantage of the post-CES boost in investor confidence and explore windows out of the stock.We're taking our Buy rating away from Advanced Micro Devices, Inc. stock. AMD is largely regarded as the second-largest player in the AI accelerator market with an estimated 5-7% of the market, after Wall Street AI darling Nvidia (NVDA), who actually takes the crown with north of 90% of the market.We're downgrading AMD to a sell. The CES 2025 held earlier this week confirmed our belief that the odds are not in AMD's favor when it comes to AI. While AMD is improving its hardware/software offerings, it continues to lag Nvidia in the design cycle win. We expect the bulk of cloud capital expenditure (capex) spent from hyperscalers (i.e., Microsoft, Google, Amazon, and Meta Platforms) to favor Nvidia over AMD. If the past two years have told us anything, it's that when it comes to AI, there is no room for almost good enough, only room for perfect. We expect perfect refers to either Nvidia's next-gen Blackwell series or custom AI in-house ASIC, with little room left for AMD to meaningfully compete; something we don't think Wall Street is factoring for.Our logic -We had upgraded AMD to a buy in late October on our belief that the company's AI outlook got tampered with after its 3Q24 report guided for a softer-than-expected Q4 outlook and trailed whisper numbers (for reference, whisper numbers are the unofficial/unpublished forecasts circulated on Wall Street). The company guided AI GPU sales of $5B versus expectations of $6B. We had expected a window for an intra-quarter trade based on AMD stock's history of trading higher between quarters. The stock is now down ~12% since our upgrade, and we no longer see a window for that trade, and believe expectations are once again getting ahead of themselves.Hence, we revert to our negative thesis on AMD lacking material upside to current AI growth expectations. We believe Monday's CES presentations confirmed that AMD continues to be behind Nvidia in the AI design cycle race, and it'll pay the price with less cloud capex dollars spent on its offerings.Why AMD's CES 2025 didn't give us chills?Lisa Su-led AMD put a lot on the table at CES 2025 specifically regarding offerings to support “gaming, AI-enhanced PCs, and enterprise-level applications,” with Ryzen 9000X3D processor series, Ryzen 9000HX, 9000HX3D processors, and the Radeon RX 9000 graphics card lineup among others. The DigiTimes report on the CES presentation places Ryzen 9 9950X3D as the highlight, built on Zen 5 architecture with a 16-core design (AMD's most powerful processor to date). There was also a lot of excitement around next-gen Ryzen AI 300 series processors that are centered towards AI PCs, specifically Copilot+ PCs.These are all positives, particularly with AI PC moment expected to come to fruition in 2H25, on what we believe to be three factors: 1. Microsoft Windows 10 EOL (End of Life) up in October, a more favorable interest rate environment, and PC refresh cycle from enterprise in that healthier backdrop. Canalys data already showed that AI-capable PC shipments are gaining some momentum, accounting for 20% of all PC shipments during 3Q24 at 13.3M units. With that in mind, this doesn't mean much to AMD's near-term top-line growth, in our opinion. Canalys' Ishan Dutt noted:Despite the positive momentum, significant work must still be done to convince both channel partners and end customers of the benefits of AI-capable PCs.On the server front, AMD is also reeling in excitement with a current server market share of 24.2% in 3Q24, up from 23.3% in a year ago quarter. The company is faring better than its close competitor, Intel (INTC), which has been struggling to boost investor confidence.We see more favorable windows to exit the stock as excitement around AMD's position post-CES picks up. The showcased lineup definitely did well to excite AMD bulls, with the stock trading up 5% over the past five days, outperforming the S&P 500 up ~1% but still trailing big brother Nvidia, up ~11% during the same period.What most investors didn't catch is what was missing from AMD's CES presentation on Monday: its next-gen RDNA 4 GPUs, which were not mentioned at all. Tom's Hardware investigated this further in a meeting with AMD executives David McAfee and Frank Azor, where it was explained that:“the keynote was only 45 minutes long, and with a slew of other products to announce, the company simply couldn't dedicate enough time in the presentation to the new GPUs to correctly frame the product.”While time might have been an issue, we don't think it was the only one, and Paul Alcorn from Tom's Hardware shares our sentiment. The other looming factor, in our opinion, was that Nvidia stole the show and the pressure of announcing against Nvidia. We think this confirms that AMD continues to compete in the shadow of Nvidia to an extent.Why does Nvidia matter when looking at AMD?Nvidia informs our negative thesis on AMD because the former's dominance is a big part of why we think AMD will have less of a role to play within AI for now. Nvidia took part in Monday's CES with a keynote speech by CEO Jensen Huang. Compared to AMD's presentation, Nvidia's showed more muscle, in our opinion, confirming what the market is calling its “enormous technology lead” over the peer group with new AI tech around autonomous tech, PCs, and robotics (one of which was Nvidia Cosmos, the first-ever physical AI model to be used to boost robotic performance).The company also introduced a new AI super chip that is “a pint-sized version of its high-powered GB200 platform.” It is called GB10, based on GB200, and is touted as part of a desktop called Project DIGITS. For now, we know that the big hyperscaler players, plus the tier 2 guys (which include Oracle Tesla, among others), are racing to get their hands on this new chip. Why does this matter when discussing AMD? Pegging AMD's AI strides against those of Nvidia, it becomes clear that 1. Nvidia continues to dominate the market, and 2. AMD continues to lag when pitched against this dominant player in terms of innovation. Nvidia is now effectively tapping into what is estimated to be a $1T market opportunity around robotics and autonomous technology. Nvidia is now positioned to hit a market cap of $5T by mid-2026, while AMD is still working to compete with Nvidia's already-out products.Another factor to consider here, in our opinion, is that AMD does not hold pricing power in the world of AI accelerators; it is not the best nor the cheapest product out there. We believe Nvidia is the best for now, despite some teething overheating issues and concerns over energy consumption issues. The cheapest is the in-house ASIC spearhead by Microsoft, Google, Meta, and Amazon in appliance with Marvell (MRVL) and Broadcom (AVGO). We think this increases AMD's risk profile.ValuationAMD's premium multiples are also part of why we're less excited about the company; we're less confident that AMD will be able to match, let alone beat, the earnings growth the market is pricing in. The stock trades substantially higher than the semi peer group average at an EV/Sales of 8.56x versus the group average of 3.62x. We think the higher multiple isn't justified despite the milestones announced at CES, particularly considering the concerning trend of 35 downward earning revisions versus six upward ones over the past six-months. This comes in contrast to Nvidia, which has seen 43 upward earning revisions and 46 revenue revisions over the past three months alone.Wall Street is bullish on the stock. Of the 54 analysts covering the stock, 43 are buy-rated and the remaining are hold-rated. The stock price is currently at $129 per share with a median and mean price target of $180 and $182, respectively, for a whopping 39-41% potential upside. We don't expect AMD to fulfill that upside in 1H25; instead, we think the market is getting ahead of itself once again on its AI-related expectations for AMD.The following chart outlines AMD's sell side ratings and price targets.TechStockProsWhat to do with the stock?AMD is getting more attention now after it announced its expanded consumer and commercial AI PC portfolio at CES. While that is positive and will likely allow for an expanded share of the market against the likes of Intel, it doesn't necessarily translate to material outperformance, in our opinion. We think the new AI PC portfolio won't make up for what AMD lacks in overall design wins against rival Nvidia in the AI accelerator market. This puts it at a higher risk of underperforming, particularly considering how hot Wall Street's AI-related expectations can get. We think investor money would be better positioned elsewhere for 2025.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":4,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1156446294"}