Ahead of its fourth-quarter earnings report after hours today, Advanced Micro Devices (AMD 2.37%) stock was falling. The culprit appeared to be an analyst downgrade.
As a result, AMD stock was down 2.9% as of 3:06 p.m. ET.
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Wall Street tempers its view on AMD
AMD stock has been a big winner over the last year or so as the company is expected to capitalize on the boom in artificial intelligence (AI). However, recent results have been weak due to a broader downturn in the semiconductor sector.
After that dramatic run-up in the stock, Raymond James is moderating its enthusiasm for AMD, lowering its rating from strong buy to outperform with a price target of $195.
Analyst Srini Pajjuri said the chip stock's valuation was the reason for the downgrade, and its current valuation assumes 20% unit share for the new MI300 AI accelerator, which Pajjuri says is close to the bull case.
The analyst also noted that rapid share gain is less common in the data center segment, and AMD would likely face competitive pushback from Nvidia if it reached 20% share.
What's next for AMD
All eyes will be on AMD's fourth-quarter earnings report, which is due out after the market closes today. Investors will be keen on any updates around the MI300, which the company unveiled at a well-received event last month.
Analysts are expecting modest results in the quarter due to the ongoing slowdown in the PC market. The consensus calls for revenue growth of 0.8% to $5.64 billion, and on the bottom line, Wall Street sees earnings per share inching up from $0.69 to $0.71.
Investors will also be watching the company's guidance and AI commentary closely. The stock is likely to swing significantly one way or the other on the update as high expectations are baked into the stock thanks to the emergence of generative AI.
