Advanced Micro Devices (AMD) experienced a significant decline in its stock price during early Wednesday trading, spurred by a subdued near-term sales outlook for its newly launched AI chip. This setback came despite the company’s robust first-quarter earnings report, which was overshadowed by the tempered guidance, causing AMD shares to plummet sharply.
AMD’s endeavor to challenge Nvidia’s dominance in the artificial-intelligence-focused data-center chip market encountered obstacles as demand for its traditional server chips dwindled amid the pursuit of higher-end processors. Consequently, revenue for two of its three main reporting units – gaming and client segments – witnessed notable declines, offsetting the strong performance of the data-center segment. This segment saw an impressive 80% increase in sales to $2.3 billion, primarily fueled by the launch of its new MI300X, a graphics-processing unit designed to support generative artificial intelligence technologies.
Tech analysts were quick to highlight the competitive advantages of AMD’s MI300X over Nvidia’s top-selling H100, citing superior memory capabilities and processing speed. Despite these advancements, AMD CEO Lisa Su acknowledged challenges in meeting market expectations, particularly in the near term. While expressing confidence in the group’s AI-related sales, Su’s projection of $4 billion in sales for the year fell short of some analysts’ expectations, contributing to the decline in AMD’s stock price.
KeyBanc Capital Markets analyst John Vinh revised his price target for AMD downward, citing investor disappointment with the sales outlook. Despite this adjustment, Vinh maintained an overweight rating on the stock, underscoring continued strong demand for GPUs and the company’s long-term growth prospects.
Cantor Fitzgerald analyst C.J. Muse echoed Vinh’s sentiment, emphasizing AMD’s position for long-term growth despite near-term challenges. While acknowledging potential headwinds, Muse affirmed an overweight rating on the stock, reflecting optimism about AMD’s competitive stance in the AI market.
UBS also viewed the muted sales outlook as a transient issue, indicating a buying opportunity for investors. Despite lowering its price target, UBS remained optimistic about AMD’s long-term prospects, underlining the company’s potential to capitalize on increasing demand for high-performance computing solutions.
In its first-quarter earnings report, AMD reported non-GAAP earnings of 62 cents per share, slightly exceeding analysts’ expectations. Group revenue increased by 2% to $5.47 billion, slightly surpassing consensus forecasts.
Looking ahead, AMD anticipates revenue in the range of $5.7 billion for the current quarter, with a gross-profit margin of around 53%. CEO Lisa Su emphasized significant growth opportunities in AI, highlighting AMD’s position to capitalize on the rising demand for high-performance computing solutions.
Despite the premarket decline in AMD’s stock price, analysts remained bullish on the company’s long-term growth prospects, emphasizing its competitive position in the AI market and sustained demand for its products.
