AMD posted its worst stock drop in more than seven years after the chipmaker’s sales forecast disappointed investors — a sign that the company is not advancing artificial intelligence (AI) at the pace Wall Street expected.
First quarter sales are expected to be around US$9.8 billionwith a margin of US$300 million more or less, the company said in a statement on Tuesday. Analysts estimated US$9.39 billion on average, but some projections exceeded US$10 billionaccording to data compiled by Bloomberg.
On a positive note with caveats, AMD reported some sales of older chips in China. This increased revenue — and signaled that the company is circumventing commercial restrictions — but weighed on profit margins.
The projection frustrated investors who expected a higher return from increased AI spending. AMD still runs behind Nvidia Corp. in this lucrative market, but the manufacturer claims that a new, more powerful project — scheduled for the second half of the year — will give it an advantage.
Shares fell 16%for US$ 204,01in New York, on Wednesday — the biggest intraday drop since October 2018. The shares accumulated an increase of 13% for the year as of Tuesday’s close.
CEO Lisa Su maintained her usual optimistic tone and repeated the prediction that the company’s AI revenue will reach the tens of billions of dollars in 2027. She downplayed questions about the possibility of component shortages and said the company will be able to meet the expected increase in orders.
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“There is no doubt that demand remains strong,” Su told analysts on a conference call. “And so we are working with our supply chain partners to increase supply as well.”
Fourth quarter sales grew 34%for US$10.3 billionabove the average estimate of US$9.7 billion. The profit was $1.53 per shareexcluding certain items. Analysts projected US$ 1,32 on average, according to data compiled by Bloomberg.
The business of data centers of AMD — the main beneficiary of AI spending — advanced 39%for US$5.38 billion in the period. Analysts predicted US$4.97 billion on average. Sales linked to personal computers rose 34%for US$3.1 billioncompared to the average forecast of US$2.89 billion.
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Like Nvidia, AMD is dealing with U.S. restrictions on what it can export to China — the world’s biggest chip market. President Donald Trump recently moved to ease restrictions, but the process of obtaining the necessary licenses from the Commerce Department has taken time.
The company generated US$390 million in revenue in the last quarter from the sale of previous generation MI308 chips to Chinese customers. For the current quarter, expect about US$100 million in this type of sale — the drop is a sign of lower demand for a product that is becoming more outdated.
AMD is looking to sell its newest processor, the MI325in China, but it does not yet have licenses to offer this chip. The company said it continues to discuss the issue with Washington and potential Chinese customers.
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More broadly, AMD expects large contracts with OpenAI e Oracle Corp. — in addition to the general demand for AI equipment — generate tens of billions of dollars in new recipe. Analysts and investors have been pushing executives for more accurate projections on when that might happen.
AMD’s recent agreements with OpenAI, Oracle and the US Department of Energy reflect increased interest in its MI series of AI accelerators. These products, which compete directly with Nvidia chips, are used in data centers to create and operate AI services.
AMD is also one of the largest suppliers of graphics chips and CPUs used in PCs and servers. Intel, AMD’s main rival in this segment, released a disappointing forecast last month, saying it could not get enough supply to meet strong demand. Wall Street interpreted this as an indication that AMD continues to gain market share.
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