AMD Suffers Worst Rout Since 2018 on Disappointing Forecast
(Bloomberg) — Advanced Micro Devices Inc. suffered its worst stock decline in more than seven years after the chipmaker’s sales forecasts fell short to investors; This is a sign that AI is not making the progress Wall Street expected.
The company said Tuesday that first-quarter sales will be roughly $9.8 billion, plus or minus $300 million. Analysts had predicted an average of $9.39 billion, but some estimates rose above $10 billion, according to data compiled by Bloomberg.
In a mixed blessing, AMD reportedly sold some of its older chips in China. This increased revenue and signaled that the company had overcome trading restrictions, but put pressure on profit margins.
This outlook disappointed investors hoping for bigger returns from their AI spending. AMD is still trying to catch up to Nvidia Corp. in this lucrative market, but the chipmaker said a more powerful new design due in the second half of the year would give it an advantage.
Shares fell as much as 16% to $204.01 in New York on Wednesday, the biggest intraday drop since October 2018. They were up 13% this year through Tuesday’s close.
Chief Executive Officer Lisa Su maintained her usual bullish tone, reiterating her prediction that the company’s AI revenue will reach tens of billions of dollars in 2027. He sidestepped questions about the possibility of component shortages and said his company could handle the expected increase in orders.
“There’s no question that demand remains strong,” Su told analysts on a conference call. “And we are working with our supply chain partners to increase supply.”
Fourth-quarter sales rose 34% to $10.3 billion, beating the average estimate of $9.7 billion. Profit was $1.53 per share, excluding certain items. Analysts on average were forecasting $1.32, according to data compiled by Bloomberg.
The data center business, which benefited most from AMD’s artificial intelligence spending, increased by 39% to $5.38 billion during this period. Analysts on average were predicting $4.97 billion. Personal computer-related sales increased 34% to $3.1 billion. The average estimate was $2.89 billion.
Like Nvidia, AMD is struggling with U.S. restrictions on what it can export to China, the world’s largest chip market. President Donald Trump recently moved to loosen restrictions, but it took time to obtain the necessary licenses from the Department of Commerce.
The company generated $390 million in revenue last quarter from shipping older-generation MI308 chips to Chinese customers. Such sales in the current period are expected to be approximately $100 million; This decline is a sign of decreasing demand for an outdated product.
AMD is considering selling its new MI325 processor in China, but does not yet have the license to offer this chip. The company said it continues to discuss the issue with Washington and potential Chinese customers.
More generally, AMD, OpenAI and Oracle Corp. It expects giant deals with , as well as overall demand for AI hardware to generate tens of billions of dollars in new revenue. Analysts and investors are pressing executives for more precise estimates of when this will happen.
AMD’s recent agreements with OpenAI, Oracle, and the US Department of Energy reflect growing interest in its MI series AI accelerators. Competing with Nvidia chips, these products are used to build and run artificial intelligence services in data centers.
AMD is also one of the largest providers of graphics chips and central processing units used in PCs and servers. Intel, AMD’s chief rival in this space, made a disappointing prediction last month, saying it couldn’t get enough supply to meet strong demand. Wall Street took this as an indication that AMD was continuing to gain market share.
(Updates share reaction starting from first paragraph.)
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