Strong AMD stock numbers still disappoint investors

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Advanced Micro Devices Inc., the main rival to Nvidia Corp. in the market for artificial intelligence processors, gave a disappointing forecast for the current period, a sign it’s falling short of some investors’ expectations.

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First-quarter sales will be approximately $9.8 billion, give or take $300 million, the company said in a statement Tuesday. Analysts estimated $9.39 billion on average, but some projections topped $10 billion, according to data compiled by Bloomberg.

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AMD says selling older chips to China helped boost the company’s sales numbers, but weighed on profit margins. Like its rival Nvidia, AMD faces trade restrictions on what it can sell China — the world’s largest chip market.

Stock price

AMD closed at $242.11 per share on Tuesdaythough the price dropped in after-hours trading due to the disappointing guidance. Analysts rate the chipmaker overall as a “Strong Buy,” with price targets ranging from $210 to $377.

Big money, big letdown for some

The outlook disappointed some investors, who had hoped to see a bigger payoff from AI computing spending. AMD is still trying to catch up with Nvidia in this lucrative market, but the chipmaker has said that a new, more powerful design — due later this year — will give the company an advantage.

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Chief Executive Officer Lisa Su remained bullish, repeating a prediction that the company’s AI revenue will reach the tens of billions of dollars in 2027. She brushed off questions about possible component shortages and said that her company will be able to meet the expected increase in orders.

“There’s no question that demand continues to be strong,” Su told analysts on a conference call. “And so we’re working with our supply chain partners to increase supply as well.”

AMD still beating analyst expectations

Fourth-quarter sales rose 34% to $10.3 billion, beating a $9.7 billion average estimate. Profit was $1.53 a share, minus certain items. Analysts projected $1.32 on average, according to data compiled by Bloomberg.

AMD’s data centre business, the main beneficiary of AI spending, rose 39% to $5.38 billion in the period. Analysts had predicted $4.97 billion on average. Personal computer-related sales rose 34% to $3.1 billion. The average prediction was $2.89 billion.

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New deals, new opportunity for AMD

AMD expects major deals with OpenAI and Oracle Corp. to generate tens of billions of dollars in new revenue for the company, although investors have been pressing the chip giant to specify exactly when that new money will come. Those agreements, including one with the U.S. Department of Energy, demonstrate that customers are showing increasing interest in its MI series of AI accelerators. Those products compete directly with Nvidia and are used in data centres to run AI.

Although analysts remain concerned that the company’s success is reliant on a handful of customers, and that Nvidia could easily poach them.

AMD gains ground on Intel, analysts believe

AMD competes with Intel as a provider of graphic chips and central processing units in PCs and servers. After Intel’s disappointing forecasts last month, Wall Streets analysts believe AMD is continuing to steadily gain market share.

-With files from Bloomberg

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