BofA Forecasts AMD Faces PC Slowdown in 2025 Amid AI Competition from Broadcom and Marvell

This article does not constitute investment advice. The author holds no positions in the stocks discussed.

In a recent note from Bank of America (BofA), analysts have downgraded the rating for Advanced Micro Devices (AMD) from Buy to Neutral, while also lowering the target share price from $180 to $155. This decision is driven by the expectation that as the AI chip market expands, competitors like Marvell and Broadcom are likely to see increased demand, thereby limiting AMD’s capability to capture additional market share. The current surge in demand for NVIDIA’s GPUs, paired with their high prices, has motivated significant tech firms to either develop custom AI chips or diversify their supply chains to maintain competitive advantages in the burgeoning AI landscape.

BofA’s Outlook on AMD: Challenges Ahead in the PC Market

AMD operates within a distinctive niche in the semiconductor sector, where its two main rivals reside in distinct markets. Notably, when it comes to x86 processors, AMD enjoys the position of being the sole major alternative to Intel. In their latest report, which reflects a revised target share price and rating, BofA acknowledges this competitive positioning.

BofA emphasizes that while AMD has room to leverage Intel’s vulnerabilities and potentially target the AI segment, it projects revenue growth for AMD in the range of 15% to 20% annually. However, this is the only positive insight in their evaluation, as they caution about the intensifying competition emerging from the widening AI GPU market, with companies like Marvell and Broadcom gaining traction.

In contrast to the x86 CPU market, where Intel and AMD have a duopoly, the GPU and AI accelerator markets are becoming increasingly competitive. With Marvell and Broadcom stepping into these domains, AMD may face significant challenges.

BofA highlights NVIDIA’s substantial grip on the AI accelerator market. The firm states that cloud service providers are also turning to Marvell and Broadcom for custom chips, restricting AMD’s operational latitude within the AI sector. Notably, Marvell is actively pursuing custom AI processors as part of its strategy.

During its second-quarter earnings call, Marvell’s management indicated that they are progressing well with “projects with a new Tier 1 AI customer announced earlier this year”and confirmed that AI custom silicon initiatives are poised to significantly contribute to their expected high teen growth in the data center market for fiscal Q3.

Moreover, recent media reports suggest that Broadcom is collaborating with OpenAI to facilitate the development of customized AI GPUs, reducing reliance on NVIDIA. Additionally, Amazon Web Services (AWS) made news when it unveiled custom AI chips, while Google’s use of Tensor Processing Units (TPUs) for AI computing is already established.

BofA further notes that AMD’s client PC sales saw a remarkable 40% growth in the first half of 2024, suggesting a continued momentum may carry into the first half of 2025. Specifically, AMD’s Client division generated $2.86 billion in revenue during this period, marking a 65% year-over-year increase over the first half of 2023. Nevertheless, BofA warns that a correction in the PC market could hinder AMD’s growth in the upcoming year. Consequently, the bank has lowered its 2026 price-to-earnings multiple for AMD to 28x and set a new price target of $155.

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