AMD Stock Declines Amid Delayed Data-Center Sales Surge

Advanced Micro Devices (AMD) has announced its revenue forecast for the first quarter of the year, predicting approximately $9.8 billion. This represents a year-over-year growth of around 32%, but also reflects a sequential decline of about 5%. The forecast includes an unexpected boost from AI chip sales to China, estimated at around $100 million.

AMD Revenue Outlook

For Q1, AMD’s revenue estimate is plus or minus $300 million, slightly exceeding analysts’ expectations of $9.39 billion. The forecast raised concerns about its ability to compete effectively in the data-center market, particularly with rival Nvidia.

Competition in AI Hardware Market

• AMD competes with Nvidia, the leader in AI hardware.
• CEO Lisa Su emphasized that the company anticipates robust sales of a new AI server to OpenAI and others by the second half of the year.
• Analysts are worried about AMD’s reliance on a handful of large customers, making it vulnerable to competition.

AMD’s share price dropped 7% in after-hours trading following the announcement. The market’s expectations for significant AI-related revenue have complicated the outlook for AMD.

Performance Metrics

During the last quarter, AMD reported sales of $10.27 billion, surpassing estimates of $9.67 billion. Its key data-center division experienced a remarkable 39% growth to $5.38 billion, also exceeding predictions.

Concerns Over Supply and Competition

Analysts have expressed caution regarding AMD’s plan to rely heavily on AI chip sales in China. Nvidia is ramping up its competitive strategy by attempting to attract AI chip talent and expanding its product offerings.

Manufacturing and Product Developments

AMD is strategically positioned with its manufacturing process, outsourcing to Taiwan’s TSMC. Unlike Intel, which struggles with supply constraints, AMD is expected to maintain a steady output of server CPUs.

Additionally, the company is transitioning from merely providing chips to offering comprehensive AI solutions. This includes a multi-year agreement with OpenAI, potentially bringing substantial revenue to AMD and allowing OpenAI to acquire up to 10% of the chipmaker.

Future Expectations

As the landscape of AI hardware continues to evolve, AMD must navigate challenges posed by intense competition and market demand. The company’s focus on AI server sales and enhanced production capabilities will be critical for maintaining its market position.