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Wells Fargo cuts AMD revenue estimates for 2022

Yahoo Finance Live looks at AMD's stock amid cuts to full-year revenue estimates from Wells Fargo.

Video transcript

RACHELLE AKUFFO: It's time for Triple Play, the three stocks that we're watching in the final 30 minutes of trading. We've got AMD, Ford, and Chewy on deck. So we'll kick us off with my pick, which is Advanced Micro Devices, ticker AMD. Now the chipmaker was able to claw back some gains after some heavy morning losses, currently up just over about half a percent.

Now, the losses came after Wells Fargo analyst Aaron Rakers cut estimates for 2022 to $25.5 billion and $4.11 a share from $26.2 billion and $4.32 a share. He also cut estimates for 2023 and 2024, citing PC market weakness and also inventory concerns tied to its data center business with some of their hyperscalers.

Now, most analysts do still have a buy rating on AMD. And of course, we'll hear more from the company itself, with an earnings update coming out on October 25. The stock is down around 40%, though, year to date. AMD's news dragging down some other chipmakers, including Nvidia and Intel, who, of course, were already under pressure this year.

But something to keep a lookout for, the Commerce Department is soon expected to announce restrictions on American companies selling some of these cutting edge technologies, including chips, to Chinese firms in order to really shore up US chip manufacturing, which, Seana, obviously, is going to take a while for some of the benefits of the CHIPS Act to start playing out for some of these chipmakers.

SEANA SMITH: Yeah, that's going to take a few years. And we know the government has already started cracking down just in terms of what Nvidia can send overseas to China. Wells Fargo isn't the only analyst on the Street that is a bit cautious when it comes to AMD or the chip sector, more broadly speaking, at large. Morgan Stanley out with a note recently, saying that there's more downside risk ahead, saying that valuations don't fully account for some of the economic headwinds that the sector faces.

Philly Semiconductor Index off 37% this year, so underperforming the broader market, most specifically, the NASDAQ. But despite that underperformance, Morgan Stanley making the argument that it's still well above the lows of 2019 on most valuation metrics. So they still see more downside risk here for the industry at large.