Advanced Micro Devices Inc. (AMD) has experienced a significant boost in its stock value following a robust revenue forecast, which highlights the growing impact of its artificial intelligence (AI) processors on the company’s growth trajectory. AMD projects third-quarter revenue to reach approximately $6.7 billion, exceeding analysts’ average estimate of $6.62 billion. The company also reported second-quarter results surpassing expectations and increased its forecast for AI accelerators, essential components for developing AI models.
This positive outlook signals AMD’s progress in challenging Nvidia Corp.’s dominance in the AI accelerator market. Nvidia has leveraged the surge in demand for these chips to achieve remarkable stock price growth over the past year, establishing itself as the leading chipmaker globally. AMD aims to capture a share of this burgeoning market with its MI300 series.
Chief Executive Officer Lisa Su revealed that AMD anticipates over $4.5 billion in sales from MI300 products this year, an upward revision from an earlier projection of $4 billion. However, this forecast remains below some analysts’ estimates of around $5 billion. Su attributed the growth to increased production efforts, despite ongoing supply constraints.
Su dismissed concerns about a slowdown in AI infrastructure investment, asserting that customer enthusiasm for AI remains strong. “The overall view on AI investment is: We have to invest — the potential of AI is so large,” Su stated during a conference call with analysts. “The investment cycle will continue to be strong.”
The MI300 lineup generated over $1 billion in revenue during the second quarter, and AMD plans to introduce new AI processors annually, marking a significant achievement for the company. Su noted that AMD’s Instinct MI300X products are gaining traction among cloud computing and enterprise customers, with increasing demand also seen in its traditional personal-computing and server sectors.
AMD’s revenue for the second quarter rose 8.9% to $5.84 billion, surpassing the forecast of $5.72 billion. Earnings per share increased to 69 cents, exceeding the anticipated 68 cents.
Although AMD remains a significant competitor to Nvidia in the accelerator market, it still lags behind in market share. The company hopes to capture a larger portion of the investments made by data-center operators such as Microsoft Corp. and Meta Platforms Inc. in AI technologies.
Despite strong demand for accelerators, other segments of AMD’s business have faced challenges. Sales of embedded chips and semiconductors for gaming consoles have declined recently.
Following the announcement, AMD’s stock price surged by more than 7% in after-hours trading. Earlier, shares closed at $138.44 in New York, reflecting a 6.1% decline for the year.
AMD’s quarterly report comes at the start of a busy earnings week for major semiconductor companies, including Qualcomm Inc., Arm Holdings Plc, and Intel Corp. This period is particularly sensitive for the chip industry, as investor enthusiasm for AI spending faces scrutiny amid concerns about the speed of infrastructure returns.
The Philadelphia Stock Exchange Semiconductor Index, a key industry benchmark, has fallen 11% this month. The excitement over AI investments is now tempered by anxieties about the pace at which these investments will yield returns.
AMD, based in Santa Clara, California, continues to derive most of its revenue from personal computer and server microprocessors. It also competes with Nvidia in the graphics processor market and is a major rival to Intel in both server and PC processors, as well as programmable logic chips. Additionally, AMD supplies key components for Microsoft and Sony Group Corp.’s game consoles.
In the data-center segment, AMD achieved $2.8 billion in sales last quarter, more than doubling the previous year’s figure and surpassing the $2.75 billion estimate. PC chip revenue increased by 49% to $1.5 billion. Conversely, gaming revenue dropped 59% to $648 million, as the two main gaming consoles using AMD chips enter their fifth year. Revenue from embedded semiconductors fell 41% year-over-year to $861 million, impacted by decreased demand from clients with existing stockpiles.
