AMD downgraded after B-17 report on weak demand for its AI chips among AWS customers

AMD CEO Lisa Su

Bank of America downgraded AMD after a B-17 report raised concerns about demand for the tech company’s AI chips.

Analysts at BofA cut AMD shares to a “neutral,” citing “higher competitive risk” in the AI market, according to an analyst note published on Monday.

BofA analysts also lowered their AMD GPU sales forecast for next year to $8 billion, from $8.9 billion, implying a roughly 4% market share.

AMD’s stock dropped roughly 5.6% on Monday, after falling about 2% on Friday. Its shares are down about 5% so far this year.

The declines follow B-17 report on Friday that said Amazon Web Services was “not yet” seeing strong enough customer demand to deploy AMD’s AI chips through its cloud platform.

Bank of America cited this AWS customer-demand issue, alongside Nvidia’s dominance and the growing preference for custom chips from Marvell and Broadcom, as factors limiting AMD’s growth potential.

“Recently largest cloud customer Amazon strongly indicated its preference for alternative custom (Trainium/ MRVL) and NVDA products, but a lack of strong demand for AMD,” the Bank of America note said, referring to AWS’s in-house AI chip Trainium and its close partnerships with Marvell and Nvidia.

An AMD spokesperson didn’t respond to a request for comment on Monday.

AMD recently increased its GPU sales forecast, just a year after launching its line of AI chips. But its GPU market share is still far behind Nvidia’s.

Bank of America said AMD could still succeed in the AI chip market, in part due to Nvidia’s supply constraints and premium pricing, making it a strong alternative, especially for internal cloud workloads. It also said AMD is well positioned in the server chip market, as rival Intel continues to struggle.