Investing.com -- Temu's growth in the U.S. market is beginning to show signs of deceleration, according to a note from Bank of America on Monday.

Citing data from Bloomberg Second Measure (BSM), BofA analysts noted that Temu's observed sales growth in the U.S. slowed to 37% year-over-year in August, down from 45% in July and significantly lower than the 99% growth seen in the second quarter of 2023.

This slowdown comes after a period of rapid expansion in 2023, when Temu's market share ramped up significantly.

BofA analysts attribute the deceleration to tough year-over-year comparisons and plateauing sales, with Temu's market share relative to Amazon (NASDAQ: AMZN) stabilizing at around 3% in the first seven months of 2024.

However, Temu saw a slight 40 basis point increase in August, bringing its share to 3.4%. Despite this, daily active users (DAUs) have been on the decline, dropping 17% year-over-year in August, according to Sensor Tower data.

"BSM data also indicates that absolute sales dollars vs. Amazon had seemingly plateaued at around 3% in the first 7 months of 2024, after ramping in 2023, though we do note a solid 40bps m/m in August to 3.4% (Temu grew 3.5% m/m while Amazon was down m/m following Prime Day)," wrote BofA.

The note also highlights comments from Temu's parent company, Pinduoduo (NASDAQ: PDD), which noted that "high revenue growth is not sustainable" and pointed to new challenges, including a shift toward quality over low prices and increasing global competition.

PDD is said to be taking steps to address these challenges by supporting higher-quality merchants and removing "bad actors" from its platform.

While Temu's slowing growth may have a limited impact on the broader U.S. eCommerce sector, BofA analysts caution that online advertisers like Meta (NASDAQ: META) could face slight headwinds.

With 10% of Meta's revenue coming from China-based advertisers, a slowdown in ad spend from companies like Temu and Shein could pose a minor challenge, though the bank says that broader declines would be needed for a significant impact.