Advanced Micro Devices Inc (AMD), the main contender to Nvidia Corp 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 in a statement yesterday. 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 Corp, 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.
Photo: David Paul Morris, Bloomberg
But Tuesday’s outlook signals that AMD’s payoff may come slower than some had anticipated.
The shares fell as much as 4.2 percent in premarket trading today, coinciding with a broader chip selloff driven by investors fretting that the AI boom won’t live up to expectations.
AMD stock had more than doubled this year heading into the earnings report, closing at US$250.05 yesterday. The company’s results followed a 4.1 percent decline in the Philadelphia Semiconductor Index yesterday, the sharpest drop in more than three weeks.
Third-quarter sales rose 36 percent year-on-year to US$9.25 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.
The data center business, the main beneficiary of AI spending, rose 22 percent to US$4.3 billion in the period. Analysts had predicted US$4.14 billion on average. PC-related sales rose 73 percent to US$4 billion. The average prediction was US$2.6 billion.
In the statement, AMD chief executive officer Lisa Su (蘇姿丰) said the numbers marked “a clear step up in our growth trajectory” as the company looks to AI to drive revenue and earnings growth.
She told analysts on a conference call that the AI business will generate “tens of billions” of dollars in annual revenue by 2027. The company’s PC chip business, meanwhile, should grow faster than the overall market, she said.
During the call, analysts pressed Su on when more growth would kick in, particularly for AI chips. At the moment, the company’s AI-fueled business is actually expanding more slowly than its traditional PC chip business.
In response, Su reiterated a projection that the market for AI processors would generate more than US$500 billion a year. The company will give more details on its outlook at an investor meeting next week, she said.
“Whereas US$500 billion sounded like a lot when we first talked about it, we think there is a larger opportunity for us over the next few years,” she said. “That’s pretty exciting.”
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 centers to create and run AI services.
AMD is also one of the largest providers of graphics chips and central processing units used in PCs and servers. Last month, rival Intel Corp 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.
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 didn’t include revenue from its MI308 chips shipped to China.
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