Advanced Micro Devices (NASDAQ:AMD) was downgraded to Hold from Buy by the Erste Group due in part to the chipmaker’s operating margin falling below the sector average.
“The operating margin in recent quarters is lower than the sector average,” said Erste analyst Stephen Lingnau, in an investor report. “The EBIT margin was even slightly negative in the last quarter. In view of the fact that the operating margin has not yet improved and the group’s below-average return on equity, we rate the current P/E ratio as high.”
During calendar year 2025, AMD’s EBIT margin has averaged 22% compared to 34.7% by its peers in the semiconductor sector. AMD’s net margin has averaged 19.3% compared to the sector average of 29.3%.
However, AMD’s year-over-year sales revenue gains dwarf most of its competition. AMD’s sales have surged 28% in fiscal 2025 compared to an 11% average increase by its peers, according to Erste data.
The rise of artificial intelligence has proven to be a boon to AMD’s revenue as its Data Center segment revenue increased 94% last year to $12.6B and accounts for 29% of its total income.
“The Instinct product line accelerates deep learning, artificial neural networks, and high-performance applications,” Lingnau noted. “AMD has generated revenue of more than USD 5 billion with the Instinct product line.”
AMD shares slipped 2% during early market action on Thursday.
Erste maintains its Buy rating on competitor Nvidia (NVDA).