MW AMD's stock faces a fresh risk - and this one has nothing to do with AI

By Therese Poletti

Data show that more chips were shipped to PC makers in the fourth quarter than demand currently merits

Advanced Micro Devices Inc., which disappointed Wall Street in the fourth quarter with its artificial-intelligence chip forecast, may be facing another risk -an oversupply of chips to the personal-computer market.

Bernstein Research analyst Stacy Rasgon said in a note to clients that he and his team compared data from PC unit shipments in the fourth quarter and the number of central processing units sold by both AMD $(AMD)$ and Intel Corp. $(INTC)$ in the fourth quarter. He concluded that the PC industry is starting to see a "material overbuild" again, with more supply in the channel than demand.

The anticipation last year of new tariffs from the Trump administration could be the reason PC makers appear to have ordered more chips than they need for the systems they can immediately ship.

"We believe the overall PC channel is starting to see material overbuild once again, possibly due in part to the threat of tariffs coming back into the picture," Rasgon said in a note Thursday. He pointed out that overall CPU shipments were about 13% higher than the growth rate of PCs in the fourth quarter, and well above the 2% overshipment in the third quarter.

"While difficult to quantify, we suspect a portion of [fourth-quarter] revenue upside was due to customers hedging against potential tariffs," David Zinsner, Intel's interim co-chief executive officer, said on the company's earnings call.

According to market-research firm IDC, the global PC market grew 1.8% in the fourth quarter of 2024 and faces tailwinds such as the AI PC as well as headwinds such as tariffs throughout 2025.

Also read: Why Trump's tariffs may bring worse-than-expected price hikes to consumer electronics

"The industry has seen a number of channel cycles in the wake of Covid normalization, and the fact that we appear to be headed into yet another one (after everything that has happened) makes us nervous, especially for AMD," Rasgon said. He said that overall PC shipments in the most recent fourth quarter were almost 30% below the fourth quarter of 2021, during pandemic-era peaks.

AMD's PC CPU shipments in the fourth quarter 2024 were actually higher than the peak levels during the COVID-19 pandemic. Intel's PC CPU shipments in the fourth quarter were down, he said.

"Even with the AMD share-gain story, it feels aggressive to assume the recent disparity is all due to product leadership," Rasgon wrote.

Rasgon maintained a market-perform rating on both chip stocks, with a price target of $125 on AMD and $25 on Intel.

Shares of AMD were up 1.6% in morning trading, while Intel continued toward another rise, with its shares up 8.4% shortly after the open and tracking toward a four-day winning streak.

-Therese Poletti

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February 13, 2025 10:57 ET (15:57 GMT)

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