In 2023, the interest in artificial intelligence chips or GPUs has driven considerable growth for major companies. AMD’s stock rose significantly, reflecting optimism about the company’s upcoming AI-oriented GPUs. The potential to capture market share from Nvidia, as well as attract major buyers like Microsoft and Meta, has generated investor excitement. However, some analysts are expressing caution about the future trajectory of AMD shares, suggesting that investor enthusiasm may be overheated.
Northland Capital Markets analyst Gus Richard has downgraded AMD to a market perform rating, citing concerns about inflated expectations for AI chip growth. Richard highlights how the current demand signals for the sector are distorted as a result of Nvidia’s dominant position and supply shortages. This situation has led to customers double ordering, or purchasing more chips than they actually require. Additionally, U.S. restrictions on certain chip exports to China may pose challenges for future growth. Although hopes are high for AMD’s AI chip sales and market share, Richard asserts that these figures are already baked into the company’s stock.
As of Monday afternoon, AMD shares experienced a 3.5% decline, falling to $168.17, while Nvidia shares saw a modest uptick. The market remains uncertain about the true potential of AI chip sales, and how this will affect the future success of GPU manufacturers. Investors continue to weigh the contrasting views, considering the potential growth opportunities against the distorted signals of overenthusiastic market expectations. These conflicting reports have generated significant market intrigue and speculation.