HSBC Downgrades AMD Ahead of Earnings
HSBC has downgraded Advanced Micro Devices to Hold from Buy, while slightly raising its price target to $340 from $335. The move comes as the bank sees limited upside potential for the chipmaker despite strong demand for its server processors.
The downgrade arrives just ahead of AMD’s first-quarter earnings release, scheduled for Tuesday, following a significant rally in the stock.
Strong Rally Limits Further Upside
AMD shares have surged 77% since early April, largely driven by optimism around server CPU demand fueled by the rise of agentic AI.
However, HSBC analyst Frank Lee cautioned that much of this positive momentum is already reflected in the current share price. As a result, the bank does not expect AMD to deliver a meaningful earnings surprise in its upcoming results.
Earnings Outlook Remains In Line with Expectations
HSBC projects first-quarter revenue of approximately $10.1 billion, aligning with the upper end of AMD’s own guidance. For the second quarter, revenue is expected to reach $10.5 billion, in line with broader market forecasts.
Looking further ahead, the bank believes AMD may struggle to significantly exceed expectations in 2026 due to current market pricing and operational constraints.
Supply Constraints Weigh on Growth Potential
A key concern for HSBC is AMD’s reliance on TSMC for chip production, particularly at the advanced 3-nanometer node. This technology is used in AMD’s MI350 GPUs and fifth-generation Epyc Turin server processors.
According to the analysis, limited manufacturing capacity at TSMC is expected to persist through the first half of 2027. This could restrict AMD’s ability to increase shipments, even as demand continues to rise.
Lower AI GPU and Server CPU Forecasts
HSBC has revised its 2026 AI GPU revenue estimate down to $14.6 billion from $18.5 billion, citing supply chain challenges and a slower-than-expected ramp-up of the MI450 server platform.
This projection falls below the Wall Street consensus of $15.2 billion.
On the server CPU side, the bank forecasts 2026 revenue of $11.8 billion, around 11% below consensus expectations. Unit growth is expected to remain capped at roughly 20% for the year.
Long-Term Outlook Depends on Capacity Expansion
Looking ahead, the outlook may improve in 2027 as TSMC expands its manufacturing capacity. New facilities in Taiwan, Arizona, and Japan are expected to support both 3-nanometer and 2-nanometer production.
AMD’s next-generation MI450 GPUs and sixth-generation Epyc Venice processors are planned to utilize this advanced technology. However, HSBC notes that greater clarity on foundry capacity allocation will be essential before turning more optimistic on the stock.
Market Perspective
Overall, while AMD continues to benefit from strong demand in AI and data center markets, supply constraints and high market expectations are limiting its near-term upside potential. Investors are likely to remain focused on earnings results and future capacity developments.
