By Akash Sriram and Chavi Mehta

AMD: (Reuters) – Advanced Micro Devices’s shares fell about 6% on Wednesday as analysts raised concerns that the chip designer’s targets for an artificial intelligence (AI) ramp-up may be too ambitious.

The fall came amid a broader sell-off in the tech sector that saw megacap stocks fall 1.5% to 5% and the Philadelphia SE Semiconductor Index drop 3.5%. Wall Street fell on Wednesday after rating agency Fitch downgraded the U.S. government’s credit rating.

AMD’s stock had risen 4% in extended trading on Tuesday after the company said customer interest was “very high” for its upcoming MI300 AI chip, which will ramp up in the fourth quarter.

AI has been a key theme in the chip sector so far this year, driving shares of chip companies and helping Nvidia become the first and only semiconductor firm to be valued at more than a trillion dollars.

Investors hope AMD will emerge with a challenger chip to Nvidia’s most powerful AI semiconductors and help in fulfilling strong demand for chips that can power applications like chatbot ChatGPT.

AMD’s shares have risen about 82% so far this year, compared with Nvidia’s stock that has more than tripled in value. The Philadelphia SE Semiconductor Index has gained about 52%.

AMD’s forward price-to-earnings multiple, a common benchmark for valuing stocks, stands at 31.40.

“Unless numbers get really material, soon, we fear estimates remain too high and the stock (AMD) looks a little stretched to us,” Bernstein analysts wrote in a note.

Summit Insights Group analyst Kinngai Chan said investors were giving AMD a pass hoping for a bigger AI payday.

The company forecast third-quarter revenue of about $5.7 billion, plus or minus $300 million. Analysts polled by Refinitiv on average expect revenue of $5.82 billion.

“The Bulls want AMD to be the next concept stock… the Bears say show me the results and make me believe the AI hype.”