AMD denied slowing AI demand and predicted 80% growth in data center revenue

Advanced Micro Devices - Nvidia's closest competitor in the AI chip market - forecasts an average annual revenue growth rate of more than 35% over the next three to five years. This was announced by the company's CEO Lisa Su during an investor day on Tuesday, November 11, Bloomberg reports.

Thanks to the "insatiable" demand for AI chips, revenue for the data center business will grow much faster in the same period, by an average of 80% per year, Su said. Major data center operators had anticipated a slowdown in construction and capacity additions as recently as last year, but now, Su said, data center owners are telling her they intend to accelerate investments in capacity expansion, Bloomberg writes.

Su estimates that the total market for AI chips, including graphics gas pedals, processors, and networking components, will reach a volume of $1 trillion by 2030.

AMD shares fell by 2.7% at the end of the main session on Tuesday amid a general decline in the Nasdaq Composite. However, in the extended trading, the securities rose by about 5% - at the moment they almost reached $250. Investor sentiment shifted after AMD management said the company's adjusted earnings will exceed $20 per share and operating margin will rise above 35% in the next three to five years, Bloomberg noted. Gross margins will be in the 55-58% range in the next few years, better than analysts expected, CNBC added.

Since the beginning of 2025, AMD shares have almost doubled in price, helped by agreements with OpenAI, Oracle and other major customers. These deals confirmed the high level of AMD technologies and made investors understand that the company can claim a significant share of the tens of billions of dollars allocated to building data centers, Bloomberg notes.

OpenAI is helping AMD develop next-generation systems based on its Instinct MI400X AI chips, which will begin shipping next year. AMD said these chips will be able to be combined into modular rack-scale solutions - an architecture where 72 chips work as a single compute space, which is critical for training and running the largest AI models. If AMD manages to realize such a rack-scale system, it will catch up with Nvidia, which has been offering similar solutions for three generations of AI chips, CNBC writes.

AMD updated its long-term outlook amid growing doubts among investors: whether companies can continue to invest as heavily in AI infrastructure as they did in 2023-2024, as well as whether they will get a return on those investments, Bloomberg writes.

Last week AMD presented a strong quarterly outlook that exceeded analysts' expectations. However, plans for revenue growth of more than 20% were received with restraint by investors, as most of the progress is accounted for by sales of processors for PCs and servers, rather than AI-direction, notes Bloomberg.

According to data compiled by the agency, analysts expect AMD's revenue to grow 32% this year, followed by 31% in 2026 and 39% in 2027. After that, the pace is forecast to slow down: to 20% in 2028 and 12% in 2029.

According to MarketWatch, the majority of analysts tracking the chipmaker's stock recommend buying it (43 out of 57). The other 14 advise holding the securities in a portfolio. There is no advice to sell. The Wall Street consensus price target is $267.75 per share of AMD stock, up 12.7% from the closing price on Nov. 11.

This article was AI-translated and verified by a human editor