Advanced Micro Devices (AMD) saw its shares drop around 7% on Tuesday after its quarterly forecast didn’t meet the high expectations of investors, despite strong growth in its AI chip segment. The company reported third-quarter revenue of $6.82 billion, slightly surpassing the forecasted $6.71 billion. Adjusted earnings per share matched expectations at 92 cents, with data center sales doubling for the second consecutive quarter, driven by its AI-focused products.
AMD’s new artificial intelligence chip, the MI235X, is expected to boost its AI chip revenue to $5 billion this year, up from an earlier projection of $4.5 billion. CEO Lisa Su noted that demand remains strong, with production shipments set to begin soon, especially as cloud providers look to expand their AI infrastructure.
However, AMD’s forecast for fourth-quarter revenue, at $7.5 billion, aligned with expectations but did not exceed them, disappointing investors looking for higher returns from the AI surge. The company’s gross margin grew to 54%, supported by robust data center sales. Its client PC segment grew 23% to $1.9 billion, and AMD also reported its chips’ inclusion in high-end laptops with AI capabilities marketed by Microsoft.
While its AI sector is thriving, AMD’s gaming chip revenue dropped 68% year-over-year, and the embedded segment declined by 25%. Despite this, AMD’s year-to-date shares remain up 20%, although AI-driven competitors such as Nvidia have shown even stronger gains.
With strong AI growth potential but constrained supply capacity, AMD’s projections indicate demand for chips could outpace supply into 2025, an outlook analysts believe might temper the stock’s performance until the company can meet investor expectations for sustained growth.
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