HSBC on Monday reduced its recommendation on Advanced Micro Devices to Hold, down from Buy, while slightly raising its price target to $340 from $335. The bank signaled that, despite vigorous demand for AMD’s server processors, it sees restricted potential for the chipmaker to substantially outpace market expectations.
The move precedes AMD’s first-quarter earnings report, due Tuesday, and follows a powerful run-up in the stock. AMD shares have climbed 77% since the start of April, a rally the bank attributes largely to optimistic expectations around server CPU demand tied to agentic AI.
HSBC analyst Frank Lee said he does not expect AMD to deliver an upside surprise on first-quarter 2026 results, even with strong demand. Lee contrasted AMD’s prospects with Intel’s recent quarter, which posted a beat and raised guidance, and suggested that AMD’s recent share-price gains already reflect much of the positive news.
Lee added that the combination of the recent stock momentum and AMD’s existing allocations of manufacturing capacity mean there is limited scope for the company to significantly outstrip market forecasts in 2026. A core concern driving the downgrade is AMD’s reliance on Taiwan Semiconductor Manufacturing Co. (TSMC) for production, particularly at the 3-nanometer process node.
The 3-nanometer node is used for both AMD’s current MI350 GPUs and its fifth-generation Epyc Turin server processors. HSBC expects tightness in that node to persist well into the first half of 2027, which could cap AMD’s ability to increase shipments even as demand strengthens. Lee wrote that he believes it will be difficult for AMD to obtain additional capacity beyond what was already assigned by the end of 2025.
Reflecting those supply concerns, HSBC reduced its 2026 AI GPU revenue estimate for AMD to $14.6 billion from $18.5 billion. The bank cited uncertainty in the supply chain tied to the MI450 rack server ramp and softness in the MI350 product line during the transition period. HSBC’s $14.6 billion estimate sits below the Wall Street consensus of $15.2 billion.
On the server CPU side, HSBC’s 2026 revenue forecast is $11.8 billion, which the bank notes is roughly 11% below consensus. HSBC said it expects unit growth for server CPUs to be limited to about 20% for the year.
For the near term, Lee projects first-quarter revenue of $10.1 billion, which is at the top end of AMD’s own guidance, and second-quarter revenue of $10.5 billion, aligning with consensus expectations.
Looking further ahead, HSBC said the situation could ease in 2027 as TSMC brings additional 3-nanometer and 2-nanometer capacity online from fabs in Taiwan, Arizona, and Japan. AMD’s next-generation MI450 GPUs and sixth-generation Epyc Venice processors are slated for 2-nanometer production, but Lee emphasized that clearer visibility on foundry allocations will be needed before HSBC takes a more constructive stance.
Lee concluded that improved confidence in possible upside for 2027 would require better clarity on foundry capacity allocations by late 2026.
Contextual note - The analyst action comes against a backdrop of strong market optimism for AI-driven server demand. HSBC’s revised forecasts and the downgrade reflect the bank’s assessment that supply-side bottlenecks, rather than demand, may be the primary limiter on AMD’s near-term upside.