Advanced Micro Devices Stock News and Forecast: Barclays downgrade persuades market to sell AMD

Advanced Micro Devices stock (AMD) fell victim to a downgrade by Barclays on Thursday. The global legacy banking institution based in London marked AMD down to "equal weight" from "overweight" on Thursday. Additionally, its price target was trimmed from $148 to $115. With Wednesday's close at $119.22 and highs just four months ago above $164, $115 surprised the market, because it means Barclays does not think AMD stock will outperform the market any time soon. Shares of AMC dropped 8.3% to $109.34 but are up 1.2% in Friday's premarket.

Advanced Micro Devices Stock News: Barclays is pessimistic about growth prospects

Blayne Curtis, a managing director of equities research at Barclays, is the head of the team that released a client note dealing a heavy dose of skepticism toward AMD's growth outlook. Barclays said AMD seemed able to grow its market share in the client and server markets, but the bank argued that the outlook for 2023 in the gaming and pc segments, as well as products produced by the recently acquired Xilinx, was much less rosy.

"We don't have a smoking gun pointing to a correction underway in any of these markets, but it's very clear to us that all three segments are running at elevated levels," Barclays wrote.

In other words, Barclays is just warning of a cyclical reduction in demand for certain segments. Without much evidence though, it does seem as if Barclays is just grasping for evidence it does not have. The US Treasury yield curve did invert momentarily earlier this week, which often predicts a recession. The US jobs report released today, however, sure makes it seem like the US economy is on fire.

AMD released a new software update for the gaming industry in mid-March. The Adrenalin Edition 2022 is the latest upgrade of the AMD FidelityFX Super Resolution software suite that allows for more rapid gameplay, player responsiveness and better visual resolution.

AMD's Adrenalin Edition 2022 is driver-based upscaling technology that creates performance improvements for thousands of games and gaming systems that already use AMD's Radeon platform. AMD's FidelityFX Super Resolution (FSR) 2.0 is also now expected to be released in the second half of the year and is supposed to greatly enhance frame rates to improve the visual performance of video games.

Advanced Micro Devices announced a new $8 billion share repurchase program in late February that comes on top of the prior $4 billion repurchase policy announced last year. Despite Barclays' pessimism, from the FXStreet vantage point, it sure seems like there are a number of catalysts for growth laboring simultaneously. 

AMD key statistics

Advanced Micro Devices Stock Forecast: AMD may drop to $107

On March 23 AMD stock broke out of a wedge formation, the top line of which began on December 28. After breaking through the top of the wedge, AMD shares sailed up to a range high of $126.66 before the Barclays downgrade. Now that AMD stock dropped 8.3% on Thursday, the price level is close to the top line of the wedge. The most likely scenario is that AMD stock will bounce off this top line and regain confidence before a move higher.

This seems likely, because the sell-off on Thursday seems a bit overdone. It is not like Barclays is the great oracle of semiconductors or anything. If AMD follows the FXStreet prediction, then it will find its footing on the top trend line between $107 and $108. If it closed below $107, the thesis is void.

If AMD does regain its posture, then it will need to break above the 21-day moving average ($112.32 currently) and then the 9-day moving average ($117.46 currently). From there the bull targets are $125.66 and $132.81.

AMD 1-day chart