By Arsheeya Bajwa and Max A. Cherney
(Reuters) – Advanced Micro Devices on Tuesday expected fourth-quarter sales to be slightly lower than expected. That’s because supply chain constraints are preventing it from meeting strong demand for AI chips, while the PC market is growing more slowly than some investors expected.
Shares of the Santa Clara, California-based company fell 5% in after-hours trading. The stock price has increased about 10% since the beginning of the year.
Demand for AI chips from big tech companies like Microsoft and Meta is growing at a much faster pace than supply from AMD and larger rival Nvidia, and the ability of chip companies to take advantage of the surge in orders is limited. Limited.
Revenue from its data center business, which includes AI chips, rose 122% to $3.5 billion, beating expectations.
“AMD’s stock price was priced in and up,” said Kinngai Chan, an analyst at Summit Insights. “Obviously, AMD’s (fourth quarter) outlook was not good enough for investors.”
Although AMD expects strong demand for its AI chips, it remains behind front-runner Nvidia, which accounts for about 80% of the AI semiconductor market. AMD CEO Lisa Su said the company now expects to sell AI chips worth $5 billion, up from the $4.5 billion it estimated earlier this year. Ta.
Analysts largely believe that Nvidia will maintain majority market share for the foreseeable future thanks to its entire AI ecosystem, including CUDA software and networking equipment.
TSMC, the world’s largest contract chip manufacturer, announced in July that production capacity for AI chips will be extremely tight heading into 2025, posing a major hurdle to the supply of these advanced semiconductors.
The company expects fourth-quarter sales of $7.5 billion, plus or minus $300 million, compared to analysts’ average estimate of $7.54 billion, according to data compiled by LSEG. . AMD expected adjusted gross margin to be approximately 54%, in line with analyst expectations.
The company reported third-quarter revenue of $6.82 billion, compared to an expected $6.71 billion. AMD reported adjusted earnings of 92 cents per share, in line with analyst expectations.
AMD’s results weighed on the chip sector in after-hours trading. Arm Holdings fell 1.7%, Nvidia fell 0.3% and Intel fell 0.4%. Semiconductor equipment maker Lam Research fell 0.8%.
“Once most investors understand AMD’s strong performance and lackluster outlook, they wonder what it means for the rest of the AI chip and semiconductor market,” said Michael Schulman, chief investment officer at Running Point Capital. I’m going to try to guess what that means.”
(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco; Editing by Anil D’Silva and Lisa Shumaker)
