Analyst Wolfe Research has downgraded AMD due to weaker-than-expected sales of its data center processors.

Wolfe Research downgraded Advanced Micro Devices to peer perform from outperform on Thursday, January 16, 2025, with analyst Chris Caso expressing concerns that a key business area is flashing warning signs. Caso removed his price target, which had most recently been set at $210. The downgrade was driven by concerns that the data center graphics processing unit business is tracking for lower revenue than previously forecasted.

Wolfe said to expect $7 billion in 2025 revenue from this segment, down from prior estimates of at least $10 billion. "We were early in noting that AMD's datacenter GPU business is running below expectations," Caso wrote clients on Thursday. "Our rating is now catching up to that view." The analyst also indicated that AMD likely won't provide 2025 guidance for that business on its fourth-quarter earnings call.

More broadly, Caso characterized AMD as having a "difficult" setup into its earnings report slated for early next month. This downgrade breaks with Wall Street consensus, as most analysts polled by LSEG have buy-equivalent ratings on the stock. The average price target among analysts implies shares can soar more than 45% over the next year.

AMD shares have pulled back modestly in 2025, extending 2024's decline of around 18%. The downgrade highlights the challenges facing the semiconductor company as it navigates slowing demand in its data center GPU segment, a critical growth area for the firm.