Investing.com -- Northland Capital Markets has downgraded Advanced Micro Devices to Market Perform after more than a decade of bullish coverage, setting a price target of $260 and warning that consensus estimates for 2027 are too optimistic.

Analyst coverage of AMD at Northland stretches back 11 years, when the firm initiated the stock with an Outperform rating at a time when AMD was gaining ground on Intel and few on Wall Street agreed with the call.

The competitive landscape has now shifted, the firm argues, with Intel closing the gap on AMD while Nvidia deepens its grip on AI infrastructure through its partnership with TSMC.

"While AMD is a phenomenal company, the CY27 consensus is likely too high," Northland wrote.

The firm expects AMD to beat and raise estimates when it reports next week, but cautioned the results will "likely not be as robust as Intel's."

Central to Northland Capital's cautious turn is the view that AMD faces structurally limited gross margin expansion, with non-GAAP gross margins currently in the mid-50% range.

As Intel becomes more competitive, Northland sees AMD's price premium over its rival narrowing.

The firm also flagged AMD's dependence on TSMC as a vulnerability, noting that Nvidia, as TSMC's largest customer, likely receives preferential capacity allocation and uses the supply chain "as a competitive weapon."

Longer term, Northland Capital expects AI infrastructure spending to decline in 2027, citing hyperscaler capital expenditure constraints and growing financial discipline among AI companies as they move toward usage-based pricing models.