AMD Slips After AI Chip Forecast Misses High Estimates

(Bloomberg) — Shares of Advanced Micro Devices Inc. fell as much as 9.1% in extended trading after the chipmaker made a disappointing forecast for artificial intelligence processors, a lucrative market now dominated by Nvidia Corp.

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The company projected that its MI300 line — a family of so-called AI accelerators — will generate about $4 billion in revenue this year. While that figure is higher than a previous forecast of $3.5 billion, some investors were expecting as much as $8 billion, according to analysts.

AMD is seen as a leading contender to challenge Nvidia in the market for accelerators, which help develop chatbots and other tools by bombarding them with data. But he is trying to catch up in the industry. One challenge has been producing enough chips to meet demand, CEO Lisa Su said on a conference call.

“We are short on supply,” she said. “There is no doubt that – in the short term – if we had more supply, we would have demand.”

AMD also gave a tepid revenue forecast for the current quarter. Sales will be approximately $5.7 billion during the period, the Santa Clara, California-based company said. That compares to an average analyst estimate of $5.72 billion. Weak demand for chips used in video game hardware hurt growth.

Shares fell to $143.90 in late trading after the results were released. They closed at $158.38 on Tuesday, up 7.4% for the year.

AMD’s report follows a downbeat forecast last week from Intel Corp., which said it expected demand to remain sluggish in the first half of the year. AMD expects growth in the 6% range in the current quarter, better than its biggest rival’s roughly flat projection.

While Intel is still bigger than AMD in overall sales, it only expects to make about $500 million in revenue from AI accelerators this year. Nvidia remains far ahead of both companies. Its data center business is on track to generate revenue of $95.9 billion in its current fiscal year, twice as much as the previous year and greater than the total revenue of Intel and AMD combined.

Su said supply constraints with its MI300 line are expected to ease later this year, but are having an impact in the second quarter.

In the first quarter, AMD had profit of 62 cents per share, excluding some items, on revenue of $5.47 billion. That performance compared with an estimated profit of 61 cents and $5.45 billion in sales.

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AMD’s PC chip division had revenue of about $1.4 billion, compared with an estimate of $1.29 billion. Data center sales reached US$2.3 billion, in line with the average projection. Revenue related to computer games, in turn, was US$922 million. Analysts expected sales of $965.5 million.

Like Intel, AMD still makes most of its revenue from personal computer and server microprocessors. The once-solid server market has been less reliable recently because data center operators have invested much of their budgets in Nvidia chips – the same area that AMD is now banking on.

Investors who bet on AMD’s AI prospects sparked a rally earlier this year, although shares have cooled in recent months. The announcement of a next-generation Nvidia chip weighed on shares.

AMD also competes with Nvidia in the market for graphics processors that improve images in video games. It’s Intel’s biggest rival in server and PC processors — as well as programmable logic chips, which can be reconfigured with software after they’re installed. And it supplies Microsoft Corp. and Sony Corp. the main component of your game consoles.

AMD said its gross margin — the percentage of sales remaining after deducting the cost of production — will be about 53% in the second quarter, matching forecasts.

(Updates with additional forecast starting in first paragraph.)

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