By Elsa Ohlen
AMD stock was falling after Goldman Sachs downgraded the chip maker's shares and named its rivals among the bank's picks for 2025.
The move came following a note from the bank advising investors to tackle 2025 with a "barbell" strategy and own industry-leading artificial intelligence stocks, as well as those exposed to cyclical recovery in traditional chip areas.
Goldman analysts led by Toshiya Hari downgraded Advanced Micro Devices to Neutral from Buy Thursday, cutting their price target to $129 from $175. Citing a more conservative PC and traditional server unit outlook -- and modest growth for data center graphics processing unit (GPUs) given fierce competition from rivals -- Hari also cut the chip maker's revenue estimates for 2025/26 by double digits.
AMD stock fell 2% to $119.40 in premarket trading Friday.
Goldman continues to be bullish on Nvidia, saying its GPU is the industry standard. It rates Nvidia shares Buy with a price target of $165.
Lesser-known chip equipment maker Teradyne may be another stock set to impress in 2025. It was included in Goldman's "conviction" list -- a group of stocks that it believes could outpace the S&P 500 performance -- with a Buy rating and $151 price target.
The broker also hiked Buy-rated Broadcom's price target to $255 from $240 and left its price target for Micron unchanged at $128, also with a Buy rating.
Automotive chip company Netherlands-based NXP Semiconductor caught an upgrade to Buy from Neutral, with Goldman making a small cut in target price to $257 from $260 as the stock has fallen in recent months.
It may come as a surprise that the semiconductor sector as a whole underperformed the broader market in 2024 given chip makers such as Nvidia and Broadcom had a stellar year. Yet, the iShares Semiconductor ETF gained just 19% while the S&P 500 gained 23%.
"There was stark separation between the haves and the have-nots in Compute/Networking in 2024," Hari said.
By subsector, companies enabling the AI infrastructure buildout such as Credo, Nvidia, and Broadcom, more than doubled in value. Meanwhile, stocks with less exposure to AI and more exposure to traditional PCs and servers suffered -- most notably AMD, which lost 18%. and Intel, which plummeted 59%.
"Needless to say, the bar is significantly higher in 2025 for the AI names to sustain their outperformance," Hari said, especially given soaring valuations and runaway capital spending by large cloud service providers.
"Investors are increasingly concerned given the high bar and, as such, expect monetization of the billions of dollars in capital spending by the major CSPs and consumer internet companies to come under increased scrutiny as we progress through 2025."
Write to Elsa Ohlen at elsa.ohlen@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 10, 2025 08:54 ET (13:54 GMT)
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