AMD Drops Amid Gloomy Forecast, Revealing AI Market Challenges

Jordan Hartwell

Published: February 4, 2026 10:44 AM ET

AMD Drops Amid Gloomy Forecast, Revealing AI Market Challenges

Advanced Micro Devices (AMD) faced a significant downturn, with its shares dropping nearly 7% in premarket trading following a disappointing quarterly sales forecast. The forecast cast doubts on AMD’s capacity to compete in the burgeoning AI chip market dominated by Nvidia.

Market Dynamics and AI Challenges

This decline came amid a broader selloff in global software stocks. Investor fears that artificial intelligence could replace software and related tools have been exacerbated by recent developments, including a new chatbot release from AI developer Anthropic.

Nvidia’s shares fell by 0.6%.
Broadcom saw a decrease of 1.24%.
The iShares semiconductor ETF (SOXX) dipped 0.5% in early trading.

While AMD shares doubled in value in 2025, analysts remain cautious. They warn that AMD’s prospective gains in AI hinge on a limited customer base, especially as Nvidia actively seeks partnerships with chip startups like Groq, backed by a significant $20 billion investment.

AMD’s Financial Outlook

AMD projected first-quarter revenues to be approximately $9.8 billion, with a margin of $300 million. This forecast slightly exceeds analysts’ expectations of $9.67 billion but still falls short of the $10.27 billion reported in the fourth quarter.

More troubling is that AMD’s data center segment might not have met estimates without a boost from AI chip sales to China, totaling $390 million. Bernstein analyst Stacy Rasgon noted that results were merely “inline” without this boost, highlighting a lack of “inflection” in near-term AI numbers.

Future Opportunities and Competition

Despite these challenges, CEO Lisa Su expressed optimism about the demand for AMD’s next-generation AI servers. Shipments to prominent clients such as OpenAI are expected to rise sharply in the latter half of the year. Additionally, Su reassured stakeholders that a global memory chip shortage would not hinder production.

In contrast to AMD’s performance, shares of Super Micro Computer surged over 10% after the company increased its annual revenue outlook. This uptick illustrates sustained strength in demand for AI-optimized servers, indicating resilience in downstream AI infrastructure spending.