AMD (NASDAQ: AMD) stock is taking a significant hit today, with shares down 4.40% as of 11:45 a.m. ET. The semiconductor giant's stock price decline can be attributed to a combination of bearish coverage from HSBC and growing concerns about its competitive position in the artificial intelligence (AI) market.



HSBC, a major financial institution, issued a rare double downgrade for its rating on AMD stock, lowering it from 'buy' to 'educe' and slashing its one-year price target from $200 per share to $110 per share. This negative sentiment from a major financial institution likely contributed to the stock's decline. HSBC's analysts now think AMD's competitive position in the AI space is weaker than previously conceived, with the company struggling to compete with Nvidia and gain market share in the AI data center market. This concern likely influenced investors to sell AMD stock.



HSBC's analysts are forecasting relatively soft demand for AMD's new M1325 GPU, which could indicate that the product may not be as successful as initially expected. This could lead to lower revenue and profit for AMD, making the stock less attractive to investors. Additionally, HSBC's analysts expect AMD won't have a leading solution for AI rack servers that can compete with Nvidia until late 2025 or early 2026. This delay could mean that AMD's financial performance this year will fall significantly short of Wall Street's expectations, further contributing to the stock's decline.



In response to these dynamics, HSBC has lowered its forecast for the chip specialist's AI GPU from $12.3 billion to $8.1 billion. This reduction in expected revenue and earnings could make AMD stock less appealing to investors. While AMD has plenty of long-term growth opportunities still on the table, catching up to Nvidia in the advanced GPU market will be no easy feat. Along those lines, HSBC's analysts expect the smaller chip company won't have a leading solution for AI rack servers that can compete with Nvidia until late 2025 or early 2026.



AMD's stock price drop today serves as a reminder that the company faces significant challenges in the AI market, with Nvidia remaining the dominant player. While AMD has made significant strides in the AI market, achieving lasting dominance requires sustained investment in hardware, software, and ecosystem development. The company must also effectively manage its supply chain and maintain strong gross and operating margins to remain competitive. Investors should closely monitor AMD's progress in these areas and consider the potential long-term implications of today's stock price drop.