AMD (AMD, Financial) and Intel (INTC, Financial) just landed in the investor spotlight as Citi raised concerns about a potential inventory build in the CPU market. February notebook shipments climbed 6% month-over-month—right on cue with expectations—but there's a red flag. Citi analyst Christopher Danely pointed out that while CPU shipments grew at a low double-digit pace in the second half of 2024, PC unit sales only managed mid-single-digit growth. That gap raises the possibility of excess stock piling up, which could create downward pricing pressure.
Despite the inventory worries, Citi isn't sounding the alarm just yet, keeping its Neutral ratings on both AMD and Intel. The firm still expects PC unit shipments to tick up 4% year-over-year in 2025, with Q1 notebook shipments projected to drop 10% quarter-over-quarter—better than the historical 14% decline, thanks to a weak comparison base. But if inventory levels start climbing faster than demand, both chip giants could find themselves in a tough spot, navigating potential margin squeezes in an already competitive industry.
For now, all eyes are on the balance between production and end-user demand. The semiconductor space has seen its fair share of supply chain swings, and any misstep in inventory management could spell trouble. Investors are watching how AMD and Intel position themselves for the next phase of the cycle—especially with AI-driven computing. If demand doesn't keep pace, we could see pricing pressure hit sooner rather than later.
