The Stock of AMD Faces a New Risk And This One Has Nothing to Do With AI

Advanced Micro Devices Inc. (AMD), which recently disappointed investors with its artificial intelligence (AI) chip outlook for the fourth quarter, may now be encountering another challenge—an oversupply of chips in the personal-computer (PC) market.

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In a note to clients, Bernstein Research analyst Stacy Rasgon and his team analyzed PC unit shipments for the fourth quarter, comparing them to central processing unit (CPU) sales from both AMD and Intel Corp.. Their findings indicate that the PC industry is once again experiencing a “material overbuild,” meaning that chip supply is outpacing actual demand.

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A key factor contributing to this imbalance could be the anticipation of new tariffs from the Trump administration. PC manufacturers may have over-ordered chips in an effort to stock up ahead of potential trade restrictions, leading to excess inventory.

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“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 wrote in his note. He highlighted that CPU shipments in the fourth quarter were about 13% higher than the actual growth rate of PC sales. This is a significant jump from the 2% overshipment recorded in the third quarter.

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Intel’s interim co-chief executive officer, David Zinsner, echoed this concern during the company’s earnings call. “While difficult to quantify, we suspect a portion of [fourth-quarter] revenue upside was due to customers hedging against potential tariffs,” he said.

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According to market-research firm IDC, the global PC market expanded by 1.8% in the fourth quarter of 2024. Looking ahead, the industry is expected to benefit from AI-powered PCs, but potential tariff-related challenges could pose headwinds throughout 2025.

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“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 noted.

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The analyst pointed out that overall PC shipments in the fourth quarter were nearly 30% lower than the peak levels of 2021, when demand surged during the pandemic. Despite this decline, AMD’s PC CPU shipments in the fourth quarter of 2024 actually exceeded pandemic-era peak levels, while Intel’s shipments declined.

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Rasgon expressed skepticism that AMD’s strong shipment numbers were solely a result of product leadership. “Even with the AMD share-gain story, it feels aggressive to assume the recent disparity is all due to product leadership,” he wrote.

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Despite concerns about oversupply, AMD’s stock was up 1.6% in morning trading on Thursday. Meanwhile, Intel shares climbed 8.4%, extending a four-day winning streak.

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Rasgon maintained a market-perform rating for both AMD and Intel. He set a price target of $125 for AMD and $25 for Intel, signaling a neutral stance on their near-term growth prospects.

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