Bank of America has downgraded Advanced Micro Devices (AMD) from "Buy" to "Neutral," citing risks to its 2025 outlook. The firm also lowered AMD's price target from $180 to $155 and reduced its 2025/26 earnings per share estimates by 6% and 8%, respectively, noting a significant gap of 13-23% below consensus. BofA highlighted competitive pressures in the AI market, particularly from NVIDIA and custom chip providers like Marvell and Broadcom, as key concerns. Amazon's preference for alternative solutions, such as its Trainium chips and NVIDIA products, and similar trends among cloud giants like Google, could limit AMD's growth in the AI accelerator market, where it is forecasted to hold just 4% of the $200 billion space in 2025, compared to NVIDIA's dominant 80%+ share.

Adding to these challenges, BofA pointed to a potential correction in the PC processor market in early 2025 after AMD experienced a strong 40% surge in client PC sales in late 2024. While the firm acknowledged AMD’s steady execution and opportunities to gain from Intel's restructuring struggles, particularly in PC and server CPUs, it flagged limited potential to exceed market expectations in the AI space. AMD's strong partnerships with Microsoft, Meta, and Oracle remain positives, but the tempered outlook for 2025 underscores a cautious sentiment regarding the company’s growth trajectory.