AMD disappointed investors: it's not gaining ground fast enough in the AI chip market

Nvidia's main competitor, AI chip maker Advanced Micro Devices (AMD), announced a revenue forecast that beat the Wall Street consensus estimate, but fell short of the most ambitious expectations. Some analysts had hoped for a higher return on investment in AI, Bloomberg explains. AMD shares collapsed 6% in the postmarket despite the company reporting strong fourth-quarter results.

AMD revenue in the current quarter will be $9.8 billion with a margin of error of plus or minus $300 million, the company said, reporting for the fourth quarter. Wall Street had expected a figure of $9.38 billion, CNBC writes, with some analysts expecting an even stronger forecast as large customers continue to ramp up spending on chips needed to run AI models. This suggests that the company has not yet achieved the kind of penetration into the AI segment that investors had hoped for, Bloomberg notes.

After the publication of the forecast AMD shares fell in extended trading on Tuesday, February 3, by almost 6%. At the end of the main session on the eve of the report quotations fell by 1.7% to $242.1.

The chipmaker reported strong results in the quarter, with revenue up 34% to $10.27 billion, while analysts had forecast $9.67 billion, according to LSEG, CNBC reported. Adjusted earnings per share came in at $1.53 per share, with the Wall Street consensus at $1.32. Net income more than tripled to $1.51 billion, or $0.92 per share, compared to the same period last year.

AMD is one of the two largest manufacturers of graphics processors for artificial intelligence tasks, although the company's share in this market is still small - the industry is still dominated by Nvidia, CNBC notes. The chipmaker's sales in the Data Center segment, which includes AI chips, grew 39% year-on-year to $5.4 billion in the same quarter of 2024.

Revenue in the client and gaming solutions segment increased 37% to $3.9 billion. The growth was driven by strong demand for Ryzen processors for notebooks and PCs, which continue to wrest share from Intel, CNBC points out.

Embedded solutions (Embedded) showed more modest dynamics, expanding year-on-year by only 3%.

AMD, like Nvidia, has struggled to ship AI chips to China amid tightening U.S. export controls. The company noted Tuesday that it sold $390 million worth of older Instinct MI308 chips there in the fourth quarter and expects another $100 million in revenue in the current quarter. That said, Nvidia did not disclose in its last published report (for the third quarter) that it had shipped its H20 processors to China, and the company's CFO Colette Kress said the chipmaker could not do any meaningful business in China. AMD's presence in this crucial market showed that the company is overcoming trade restrictions, but the same negatively affected profitability, emphasizes Bloomberg.

AMD announced the signing of major contracts during the reporting period, including deals with ChatGPT developer OpenAI and cloud infrastructure provider Oracle. The chipmaker expects these agreements to generate tens of billions of dollars in new revenue. The company also plans to start shipping a new integrated server AI system called Helios this year. AMD shares have more than doubled in value over the past year. The company specified that the growth was fueled by both shipments of CPUs and graphics gas pedals for AI.

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