AMD shares soared 15% after a strong report and a confident outlook for AI demand

Chipmaker Advanced Micro Devices beat Wall Street's expectations for first-quarter revenue and earnings. The company also gave an "excellent" revenue outlook for the current quarter. AMD reported a surge in demand for chips for data centers powering artificial intelligence. AMD shares jumped 15% on the post-market after the reports were released.

AMD's revenue increased 38% to $10.25 billion in the first quarter, the company reported Tuesday, Ma. 5. Wall Street, according to LSEG, had forecast $9.89 billion, CNBC writes. Adjusted earnings per share rose 43% to $1.37 versus expectations of $1.29. Adjusted net income rose 45% to $2.27 billion.

About half of AMD's revenue ($5.8 billion, +57% year-on-year) in the first quarter was attributed to the division producing semiconductors for data centers, the company said in its report. It is now "the primary driver of our revenue and profit growth," AMD CEO Lisa Su said in a statement. Analysts had forecast segment revenue of $5.61 billion, Bloomberg writes. "Going forward, we expect a marked acceleration in the server business: the company is ramping up shipments to meet strong demand," Su emphasized.

Revenue in the client and gaming solutions segment, which includes Ryzen PC processors and Radeon gaming graphics cards, grew 23% to $3.6 billion.

For the current quarter, AMD forecast total revenue of about $11.2 billion. Analysts on average had anticipated growth of $10.5 billion, Bloomberg calculated. The company gave a "great" forecast: expectations for both sales and gross profit are well above what Wall Street had assumed, Barron's noted.

The chipmaker's shares soared more than 15% to about $410 in extended trading on Tuesday after the release of its financials. At the main trades, the securities rose by 4% to $355.3. AMD shares have added nearly 66% since the beginning of the year. They are among the top 25 best performers in the main U.S. S&P 500 index, MarketWatch noted.

Although AMD has lagged far behind rival Nvidia in the AI graphics processing unit (GPU) market, investors have recently been actively buying the company's securities on optimism that this market is big enough for multiple players, CNBC writes.

Also, unlike Nvidia, AMD has long been one of the leading manufacturers of central processing units (CPUs). That market is undergoing a massive resurgence as agent-based AI changes computing needs. Last week, the chipmaker's stock jumped after AMD and Intel announced that they would work together on a new instruction set for x86 processors. The new feature, dubbed AI Compute Extensions, should improve performance and energy efficiency by increasing compute density by a factor of 16, the channel explains.

In addition to CPUs and GPUs, AMD is expected to begin shipping its first full-fledged AI data center rack, Helios, later this year. It should compete with Nvidia's Grace Blackwell and Vera Rubin systems, which sell for over $3 million. OpenAI and Meta are already planning to purchase Helios systems, CNBC writes.

At the same time, HSBC downgraded the company's shares from Buy to Hold just before the AMD report was published. Analyst Frank Lee warned about the overcapacity of Taiwanese TSMC, producing chips for AMD: this may prevent the American company to fully realize the market demand for central processing units.

Most analysts tracking AMD stock recommend buying it: the securities have 43 Buy and Overweight ratings versus 13 Hold, MarketWatch shows.

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