Advanced Micro Devices has struggled in the shadow of Nvidia when it comes to artificial-intelligence chips. That situation is only getting worse for AMD, which also might need to start worrying about Intel, according to Jefferies analysts.

AMD has fallen short of the market's hopes for its AI business, as Nvidia's graphics-processing units [GPUs] continue to dominate. There is little sign of that changing, with AMD's current MI300 AI chips failing to match up even to Nvidia's Hopper hardware, which is now being replaced by Blackwell processors and eventually by next-generation Rubin chips.

"Data from our proprietary GPU benchmarking report suggests [Nvidia's Hopper] H200 retains a significant performance advantage over the MI300x. Expect that gap [to] expand even further with Blackwell and Rubin," wrote Jefferies analyst Blayne Curtis in a research note Thursday.

Curtis downgraded his rating on AMD to Hold from Buy, and lowered his price target to $120 from $135.

AMD shares were down 3.2% at $106.65 on Thursday.

While Nvidia built its dominant position around training AI models, the big hope for AMD was that it could make inroads when the focus switches to inference -- the process of generating answers from those models. However, Jefferies' Curtis said testing found that Nvidia's H200 outperformed AMD's MI300x "across nearly every metric" in an inference test.

Benchmark results of AI chips can vary widely depending on the model and software used, as well as what tasks are set. Jefferies noted that AMD's hardware might not have been optimized for its tests but said it emphasizes the important of Nvidia's software.

AMD declined to comment on the findings. Its latest AI chip is the MI325X and it is expected to launch the MI350 GPU series in the second half of the year. AMD has said the MI350 will deliver 35 times more performance for inference than older chips like the MI300.

AMD is set to generate AI-related revenue of around $10 billion in 2026 and $12 billion in 2027, according to Jefferies' forecasts. That is below Wall Street consensus estimates of $12 billion and $15 billion, respectively.

The saving grace for AMD has been that while it is losing out in AI to Nvidia, it has been taking market share from Intel in data centers and personal computers. However, even that advantage could be at risk as new Intel CEO Lip-Bu Tan looks to turn around the struggling chip company.

"This is still a long road ahead but we do think that Intel had already made some progress and will have fairly competitive chips starting in 2026," Curtis wrote.

Intel shares were up 0.85% on Thursday.