Advanced Micro Devices AMD-Q forecast third-quarter revenue above Wall Street estimates on Tuesday, betting on upbeat demand for its artificial intelligence chips from businesses rushing to expand infrastructure to dominate the latest technology.
Shares of the Santa Clara, California-based company rose two per cent in extended trading.
AMD’s shares have climbed more than 40 per cent this year, far outpacing a nearly 12 per cent jump in the benchmark chip index, as investors bet on the company’s ability to capitalize on the widespread use of AI.
Chips that power complex AI systems for Microsoft MSFT-Q, Meta Platforms META-Q, generative AI leader OpenAI and other customers are still feverishly sought after by tech companies.
Meta has raised the bottom end of its annual capital expenditure forecast by US$2-billion, to a range of between $66-billion and $72-billion. Similarly, Microsoft forecast a record $30-billion in capital spending for the first quarter of the current fiscal year to meet soaring AI demand.
The company expects revenue of about $8.7-billion for the third quarter, plus or minus $300-million, compared with analysts’ average estimate of $8.30-billion, according to data compiled by LSEG.
However, AMD has not benefited from the AI spending splurge to the same degree as rival Nvidia NVDA-Q.
“Investors may be paying closer attention to their data center segment as they roll out new products to compete with NVDA and go after more reliable customers,” said Carson Group chief market strategist Ryan Detrick.
In Nvidia’s fiscal first quarter, its data center segment jumped 73 per cent to $39.11-billion as companies scrambled to adopt the company’s flagship Blackwell chips and systems. Nvidia’s data center business includes its graphics processors (GPUs) and networking hardware.
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By comparison, AMD’s second-quarter data center revenue grew 14 per cent to $3.2-billion, roughly in line with analysts’ expectations of $3.22-billion, according to LSEG estimates. Beyond its Instinct AI chips, AMD also includes server processors (CPUs) in its data center segment.
AMD’s relatively lackluster data center revenue in the second quarter was “enough to raise an eyebrow,” Dan Morgan, portfolio manager at Synovus SNV-N Trust, an AMD and Nvidia shareholder. “AMD trades off of data center.”
In the conference call after AMD reported results, CEO Lisa Su said the company’s AI chip revenue declined year-over-year because of the U.S. export restrictions on exports to China and the transition to next-generation MI350 series AI chips.
The company began volume production of the MI350 series ahead of schedule in June, Su said, and AMD expects a steep ramp-up in production of the chip in the second half of this year.
The chip designer’s third-quarter revenue of about $8.7-billion, plus or minus $300-million, compared with analysts’ average expectation of $8.30-billion, data compiled by LSEG showed. AMD estimated third-quarter adjusted gross margins of roughly 54 per cent, compared with estimates of 54.1 per cent. AMD said last month the Department of Commerce would review its license applications to export its MI308 chips to China and it plans to resume those shipments when licenses are approved, after U.S. curbs announced in April required it to obtain a license to ship advanced AI processors to China.
AMD had forecast a $1.5-billion hit to revenue this year due to these curbs, with most of the impact affecting the second and third quarters.
Adjusted for stock-based compensation and other items, AMD reported a second-quarter profit of 48 cents a share on revenue of $7.69-billion