Merrill Lynch said on Thursday it had narrowed its fourth-quarter loss estimate for chipmaker Advanced Micro Devices Inc. due to better-than-expected demand for AMD's Athlon chip.

Analyst Joseph Osha, in a research report, said he was cutting the loss estimate to 15 cents a share from 23 cents. He said he expects revenues to grow 17 percent from the third quarter, entirely on the back of stronger microprocessor revenues.

Osha said demand for the Athlon chip has held up through the end of the fourth quarter, which is better than he had expected.

He maintained a "neutral'' rating on AMD's stock for the intermediate term but said the scheduled first-quarter launch of Intel Corp.'s INTC Northwood chip poses a substantial challenge.

AMD shares closed Wednesday at $15.62 on the New York Stock Exchange.