AMD predicts weaker first-quarter sales, shares plunge on Nvidia comparisons
Written by: Arsheeya Bajwa and Stephen Nellis
Feb 3 (Reuters) – Advanced Micro Devices on Tuesday forecast a slight decline in quarterly revenue, raising concerns that it can effectively challenge Nvidia in the emerging artificial intelligence market and sending its shares down 8% in after-hours trading.
The weak forecast comes despite an unexpected increase in sales of certain products artificial intelligence Chip sales to China began in the last quarter after the Trump administration approved licensing for AMD orders in early 2025.
If not for $390 million in sales to China, AMD’s data center segment would have missed estimates for the fourth quarter.
AMD said it expects revenue of about $9.8 billion (plus/minus $300 million) this quarter. That figure was down from $10.27 billion in the fourth quarter, up 34% year over year, and above LSEG’s estimates of $9.67 billion.
PALES IS NEXT TO NVIDIA
Although AMD is seen as one of the few competitors that can seriously challenge Nvidia, investors have noted the stark contrast between the two companies’ performances. AMD expects adjusted gross margin of 55% this quarter. Nvidia said it expects adjusted gross margin in fiscal 2027 to be in the mid-70% range.
“Big boom expectations for AI-related hardware companies have distorted what the market is looking for,” said Bob O’Donnell, president of TECHnalysis Research.
AMD CEO Lisa Su said in a conference call with investors that the current first-quarter forecast consists of $100 million in sales to China, where the situation remains “dynamic.”
The US government has imposed restrictions on the export of advanced chips to China, but AMD has obtained a license to sell modified versions of its MI300 series AI chips there. The MI308 chip competes with Nvidia’s H20 chip in China.
OPEN SALES
AMD has ramped up product launches and is pivoting to selling full AI systems to better compete against Nvidia, which now offers “rack-scale” systems that combine GPUs, CPUs and networking hardware.
Last year, ChatGPT signed a multi-year deal to supply AI chips to owner OpenAI; this would generate tens of billions of dollars in annual revenue and give the startup the option to buy about 10% of the chip maker.
Su reiterated on Tuesday that the company expects sales of a new flagship AI server to OpenAI and others to grow rapidly in the second half of this year, and said a global memory chip crisis would not slow its plans.
“I don’t believe we will be limited in supply in terms of the ramp we have in place,” Su said.
