The Advanced Micro Devices (AMD) stock price has continued to underperform the market even as artificial intelligence tailwinds remain. AMD peaked at $226.86 on March 4th and has retreated to $129, a 43% crash. So, what will happen to AMD shares in 2025?
AMD stock price technical analysis
The weekly chart shows that the AMD share price has been in a strong downtrend in the past few months after peaking at $226.85 in March last year. This performance means that it continues to underperform NVIDIA, the biggest semiconductor company in the world.
The stock formed a doji candlestick pattern, a popular bearish reversal sign. It has then dropped below the key support level at $164.58, its highest point in November 2021.
AMD has also moved below the 50-week and 100-week moving averages, a sign that bears are in control for now.
It has also moved below the ascending trendline that connects the lowest swings since October 2022. Moving below that level is a sign that bears have prevailed.
The Relative Strength Index (RSI) and the MACD indicators have continued falling in the past few months. The RSI is approaching the oversold level. The stock has also formed a head-and-shoulders chart pattern, which is a popular bearish sign.
Therefore, the stock will likely continue falling in the first quarter. The next point to watch is $92.81, its lowest level since October 2023.
AMD stock chart | Source: TradingView
Advanced Micro Devices faces major headwinds
The AMD stock price has dropped sharply because the company faces substantial headwinds as key parts of its business slow.
For example, the gaming industry is slowing substantially, which has affected demand for AMD’s chips. The most recent results showed that gaming revenue dropped by 69% in the third quarter to $462 million, and operating income fell by 94% to $12 million. This trend may continue for a while.
AMD’s embedded revenue is also slumping. It dropped by 25% in the first quarter to $927 million, while the operating income fell by almost 40% to $372 million. Fortunately, gaming and embedded are the smallest divisions in the company.
The data center and client business have offset their slowdown. The data center segment, where it sells CPUs and GPUs, rose by 122% to $3.5 billion, while its operating income jumped by 240% to $1.04 billion. This growth has made it the only major alternative to NVIDIA, which sells the most advanced AI chips.
The client division generated $1.88 billion in revenue, a 29% increase from the same period last year. Its operating income rose to $276 million.
AI spending could start to slow
AMD may continue benefiting from the ongoing data center investments because its AI chips are cheaper than NVIDIA’s.
The risk, however, is that the AI industry is starting to slow down, a move that may see big companies like Microsoft and Amazon scale back their investments this year.
These signs started to show after NVIDIA published strong results that pointed to slow sales. If this happens, companies in the AI industry like AMD could face substantial headwinds.
However, AMD could benefit from this since its AI chips are cheaper and of high quality. As such, firms may diversify to them over time.
Another key concern is that AMD is not a cheap company. Its forward PE ratio is 96, higher than the industry average of 31 and higher than NVIDIA’s 50. Remember that AMD’s revenue is not growing as it did in the past. It has a forward revenue growth of 11% compared to NVIDIA’s 93%.
Therefore, there is a risk that the AMD stock price will retreat this year because of its weaker technicals and fundamentals. The only caveat is that the stock may rebound because of its data center revenue growth.
Read more: AMD stock price analysis: AI Winter and death cross in focus
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