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Raymond James downgraded AMD (NASDAQ:AMD) from Strong Buy to Outperform on Tuesday, concurrently adjusting the stock’s price target to $195 from $190 per share. Analysts cited heightened expectations for AI (artificial intelligence) revenue as the primary reason for the rating revision.

The analysts emphasized the early stages of the MI300 ramps and anticipated a compression in multiples as revenue accelerates. They projected AMD’s base business to generate $3.5-4 in earnings per share (EPS) by 2025, necessitating AI GPUs to contribute over $3 EPS, equivalent to $12 billion in revenue or 800,000 units.

In comparison, the analysts highlighted that NVIDIA (NVDA) shipped an estimated 2 million units in CY23, with a projection of 3.2 million units for CY25. While acknowledging the possibility of a ~20% unit share, they expressed reservations, considering AMD’s current <15% unit share in Gaming GPUs and approximately 25% share in Server CPUs.

Raymond James’ overall analysis suggested that the stock already reflects an approximate 20% unit share for AI GPUs, aligning closely with their bullish scenario.