AMD’s outlook fails to wow investors after AI-fuelled rally

[SAN FRANCISCO] Advanced Micro Devices (AMD), the main contender to Nvidia in the artificial intelligence (AI) chip market, failed to impress investors with its revenue forecast after an eye-popping rally sent expectations soaring.

Fourth-quarter revenue will be roughly US$9.6 billion, the company said on Tuesday (Nov 4). Though analysts had estimated US$9.2 billion on average, some projections ranged as high as US$9.9 billion.

Investors have bet heavily on AMD following blockbuster agreements with OpenAI and Oracle, which plan to use the company’s chips in their build-out of AI computing. The hope is that AMD can finally crack Nvidia’s dominance in the AI processor market.

But Wednesday’s outlook signals that AMD’s payoff may come slower than some had anticipated.

The shares fell about 3 per cent in extended trading following the announcement. AMD stock had more than doubled this year heading into the earnings report, closing at US$250.05 on Tuesday.

Third-quarter sales rose 36 per cent to US$9.3 billion, beating a US$8.7 billion average estimate. Profit was US$1.20 a share, minus certain items. Analysts projected US$1.17 on average, according to data compiled by Bloomberg.

Data centre sales rose 22 per cent to US$4.3 billion in the period. Analysts had predicted US$4.14 billion on average. Personal computer-related sales rose 73 per cent to US$4 billion. The average prediction was US$2.6 billion.

In the statement, chief executive officer Lisa Su said the numbers marked “a clear step up in our growth trajectory” as AMD looks to AI to drive revenue and earnings growth.

AMD’s recent agreements with OpenAI, Oracle and the US Department of Energy reflect increased interest in its MI series of AI accelerators. Those products, which go head to head with chips from Nvidia, are used in data centres to create and run AI services.

SEE ALSO

AMD is also one of the largest providers of graphics chips and central processing units used in PCs and servers. Last month, rival Intel pointed to strong demand for new AI-capable laptops and corporate servers. AMD has been taking market share from its longtime nemesis in those key areas.

But like Nvidia, AMD has been caught up in the growing standoff between China and the US. Washington has placed restrictions on shipping the most powerful AI accelerators to the Asian nation, citing security concerns. Chipmakers have lobbied for an easing of the rules, arguing that doing more business in China would strengthen the US.

A recent meeting by US President Donald Trump with Chinese counterpart Xi Jinping raised hopes that some of the restrictions would be lifted, but the impasse has not been resolved. At the same time, Beijing is pushing local companies to rely on homegrown alternatives.

AMD previously warned that the Chinese export restrictions would cost it US$1.5 billion in revenue this year. The company said on Tuesday that its third-quarter results did not include revenue from its MI308 chips shipped to China.

AMD is the second-biggest provider of graphics chips, which form the basis for the AI accelerators that run in data centres. Its microprocessors, meanwhile, compete directly with Intel products in PCs and servers. BLOOMBERG