AMD shares plummeted 9% following Musk's decision to source only Nvidia chips for SpaceX

AMD shares fell 8.8% in after-hours trading on August 4 in New York, despite record quarterly revenue. The plunge followed a statement by SpaceX CEO Elon Musk that his company would no longer purchase AMD chips, according to The Wall Street Journal. On August 5, AMD shares fell nearly 8% in after-hours trading in the U.S.

AMD and SpaceX held their quarterly earnings conference calls almost simultaneously. The chipmaker reported a sharp increase in sales for data centers, while Musk praised its biggest competitor—market leader Nvidia. “Going forward, we’ve decided to use Nvidia exclusively, as we believe the Blackwell architecture is the best,” he said, discussing SpaceX’s strategy for investing in computing infrastructure for artificial intelligence (quoted in the WSJ).

Back in May, Musk said that his two main companies—Tesla and SpaceX—would likely continue to purchase chips from both Nvidia and AMD, the newspaper reports.

AMD’s revenue for the fiscal quarter ended June 27 totaled $11.5 billion, slightly exceeding both the market consensus ($11.3 billion, according to FactSet) and the company’s own forecast. At the same time, the chipmaker set a new record for sales of central processing units (CPUs)—the backbone of its business—for the fifth consecutive quarter: unprecedented demand for them is being driven by the proliferation of AI agents, the WSJ notes.

AMD's data center revenue doubled year-over-year in the second fiscal quarter, reaching a record $6.7 billion. This segment now accounts for 58% of the company's total revenue, up from 42% a year earlier.

AMD's net income totaled $2.3 billion, exceeding Wall Street's expectations ($1.7 billion). It was higher than operating income primarily due to a $483 million gain on long-term investments, according to the report. Operating profit reached $2 billion but fell slightly short of analysts’ forecasts, the WSJ reports.

In an interview with Yahoo Finance, Futurum strategist Shey Bolur attributed the decline in AMD’s stock to the fact that the market had been expecting an exceptionally strong earnings report. According to him, the company exceeded forecasts on key metrics, but this proved insufficient for its stock, which at the time was trading at a P/E ratio (price-to-earnings ratio) of around 60. Bolur noted that “this isn’t a zero-sum game” and that he doesn’t like such comparisons, but he pointed out that the P/E ratio of market “king” Nvidia is around 20.

Investors are now evaluating AMD using the same criteria as Nvidia and the largest cloud infrastructure providers, according to eMarketer analyst Jacob Born. They want to see evidence that investments in AI infrastructure will yield ever-greater returns, Reuters quotes him as saying.

On August 4, Jefferies analyst Blane Curtis slightly lowered his price target for AMD shares—from $650 to $640—but maintained his “Buy” rating, according to MarketScreener. According to S&P Global, the majority of analysts covering the chipmaker’s stock have issued the same recommendation.

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