Due to a downgrade report, AMD, which was "the hottest" at the beginning of the year, experienced a sharp decline overnight. Analysts say they "cannot provide a valuation."

Since 2024, AMD's stock price has risen by 21%, attracting a lot of attention from investors. Investors are betting on AMD's AI-oriented GPU to be launched this year and seize market share from market leader NVIDIA.

"However, as expectations for AI chip growth continue to rise, Northland Capital Markets analyst Gus Richard admits that he doesn't know how to value AMD," Richard wrote in a report on Monday.

"We downgrade our valuation to a 'devil if we know' rating," he said, adding that his rating is actually equivalent to a hold.

Richard made this judgment because he believes that investors' expectations for AI chip growth have entered a state of "irrational prosperity." He expects the total revenue of the AI chip market to reach $125 billion by 2027 and says the range of expectations is very large, with some analysts estimating $100 billion and others estimating $400 billion.

"Artificial intelligence is big, really big, just not as big as investors imagine," Richard wrote.

Richard believes that overall demand is distorted because market leader NVIDIA is actually the "sole source" of AI chips and has been unable to meet demand, causing customers to have to purchase more chips than they actually need, resulting in "repeated orders."

According to Richard's calculations, if AMD can sell $16 billion worth of AI chips in 2027 and achieve double-digit growth every year, AMD will have about 13% market share and will need to continue to increase its investment in research and development to keep up with NVIDIA's pace.

However, investors seem to be wary of Richard's report. As of Monday's close, AMD's stock price fell by 3.47% to $168.18. Meanwhile, NVIDIA's stock price rose by 0.27%.