AMD Shares Drop

Shares of Advanced Micro Devices (NASDAQ: AMD) declined more than 3% on Tuesday after Morgan Stanley expressed concerns about AMD's AI supply chain strategy.

Wafer Bookings

Analysts noted that AMD seems to have reduced its CoWoS wafer bookings at Taiwan Semiconductor Manufacturing Company (TSMC) for 2025 due to uncertainty surrounding MI325 demand. Morgan Stanley stated:
> "AMD seems to have trimmed some CoWoS wafer booking at TSMC for 2025 given uncertainty around MI325 demand."

This conservative approach indicates AMD is managing potential fluctuations in demand for its AI processors.

Competition and Capacity Absorption

Interestingly, Nvidia (NASDAQ: NVDA) quickly absorbed the vacated capacity at TSMC, signifying its aggressive stance in the AI market.

Morgan Stanley's note also highlighted broader semiconductor industry trends, revealing that other companies are increasing production. For instance, Marvell (NASDAQ: MRVL) has tripled its CoWoS bookings for 2025 compared to 2024. In contrast, Intel's Habana division has maintained stable wafer bookings at TSMC.

Market Landscape

The cautious outlook on AMD comes amid intensified competition in the AI sector, with Nvidia strengthening its leadership.

Additionally, the note mentioned that “WPG sales grew 25% Q/Q in 3Q vs. previous guidance of only up 5.5% Q/Q,” with increasing business from AMD CPU and GPU.

Despite the drop, AMD shares remain up approximately 5.9% year-to-date.