AMD's forecast exceeded expectations due to demand for AI chips. This boosted the sector's stock prices

AMD—Nvidia’s main competitor in the production of artificial intelligence chips—delighted the market with its revenue forecast for the current quarter, which exceeded analysts’ expectations. The chipmaker’s optimism is further evidence of the resilience of AI spending, Bloomberg notes: this may reassure investors concerned about a potential bubble forming in the AI infrastructure industry. AMD’s stock jumped more than 6% in after-hours trading following the earnings release.

AMD expects its revenue to grow by approximately 66% this quarter, reaching $17 billion (plus or minus 3%). Wall Street had expected $16.3 billion, according to Bloomberg. The company attributed the optimistic forecast to strong demand for processors and accelerators for data centers. In the third quarter, AMD’s revenue from sales of such equipment nearly doubled, reaching a record $8.55 billion, compared with the $8.2 billion analysts had expected. This segment accounted for about 64% of the chipmaker’s total revenue ($13.38 billion).

AMD has been trying for several years to catch up with Nvidia in the market for graphics processing units (GPUs) for artificial intelligence, and is now experiencing a new surge in demand for its central processing units (CPUs) thanks to the proliferation of agent-based AI applications, such as Meta’s Muse, according to CNBC. Growing demand from agent-based AI developers helped AMD’s stock hit a new record high in October.

“Adoption is just beginning, and we expect demand to surge as AI agents become more widespread and take on more complex tasks,” said AMD CEO Lisa Su in a call with analysts following the third-quarter earnings report.

AMD shares rose more than 6% in after-hours trading on November 3. During regular trading hours, the stock rose 3.7% to $483.9.

AMD's forecast provides further confirmation of the resilience of artificial intelligence spending, which should reassure investors following a sharp sell-off in the sector in late October and early November, according to Bloomberg.

“AMD’s earnings report serves as a test of both the company’s performance and the overall investment in AI,” Bloomberg quotes Emarketer analyst Jacob Born as saying. According to him, AMD’s results “will give investors confidence following the sell-off of tech and semiconductor stocks, as investors are increasingly scrutinizing AI spending and the return on those investments.”

AMD's outlook, along with a strong forecast from server manufacturer Super Micro Computer, sparked a rally in the stocks of AI hardware makers and cloud providers on Tuesday evening. Shares of a number of companies rose, including CoreWeave, Nebius, Dell Technologies, and Hewlett Packard Enterprise.

The negative aspect of AMD’s report was the data on sales of personal computer processors: like its main competitor in this market, Intel, AMD faced weakening demand. AMD’s revenue in this segment fell 4% from the previous quarter to $2.95 billion, although it rose 7% year-over-year. The result was slightly below FactSet’s consensus estimate, notes MarketWatch. For Intel’s stock, the drop in demand in this segment proved painful. AMD and other players in the PC market are facing the fallout from the data center construction boom: rising memory chip costs have slowed production and driven up prices, according to Bloomberg.

Sales of AMD's gaming hardware plummeted 40% year-over-year, to $773 million.

Profitability remains one of AMD’s potential weaknesses, according to Bloomberg. The company expects its gross margin to decline to approximately 55% in the fourth quarter, down from 56% in the previous quarter. This metric reflects the portion of revenue remaining after deducting the cost of goods sold.

AMD's total revenue in the third quarter rose 45% year-over-year to $13.4 billion. Adjusted earnings per share increased 74% to $2.09. Analysts had forecast, on average, revenue of $13.1 billion and earnings per share of $1.97, according to Bloomberg. AMD continues to post record results. Its revenue is now double what it was two years ago, the agency notes.

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