AMD forecast exceeds estimates after AI chip demand soars

Advanced Micro Devices Inc (AMD) on Tuesday gave a revenue forecast that exceeded analysts’ estimates, showing that demand for data center processors remains strong.

Fourth-quarter revenue will be US$17 billion, plus or minus 3 percent, the artificial intelligence (AI) chipmaker said in a statement. That easily topped the average analyst estimate of US$16.3 billion.

The outlook provided fresh evidence that AI spending is sustainable, soothing jittery investors. Shares of chipmakers and other tech companies have been battered in recent weeks over concerns about a bubble in the AI infrastructure industry.

A man walks past the logo of Advanced Micro Devices Inc in Beijing on Sept. 23.

Photo: AFP

“AMD’s earnings are simultaneously a test of its own performance and of the broader AI trade,” Emarketer analyst Jacob Bourne said in a note. The results “will give investors encouragement given the recent tech and semiconductor selloff, as investors increasingly scrutinize AI spending and its returns.”

Under chief executive officer Lisa Su (蘇姿丰), AMD has become one of the most important suppliers of processors and computers that operate at the heart of AI facilities, underpinning a flood of new services.

Even with recent market turbulence, AMD shares have more than doubled this year. The company’s valuation reached US$1 trillion in September, putting it in an elite group.

The data center growth has helped AMD offset a slump in the PC market, where rising memory-chip costs have slowed production and depressed user demand. Intel Corp, AMD’s top rival in that field, suffered its worst stock decline in decades after a downbeat earnings report last week.

One possible weak spot for AMD: Its gross margin will narrow to about 55 percent in the fourth quarter. That measure had been 56 percent in the previous period.

On a conference call with anlysts, Su said the company has become more optimistic about long-term growth. It expects revenue to increase more than 80 percent next year, outpacing the 75 percent expansion seen by Wall Street. Sales from data centers will more than double, accounting for as much as 80 percent of total revenue.

The company “has strong confidence in our ability to sustain exceptional revenue growth for years to come, with earnings growing even faster,” Su said.

AMD’s third-quarter sales rose 45 percent year-on-year to US$13.4 billion. Profit climbed to US$2.09 a share, minus certain items. Analysts on average had predicted revenue of US$13.1 billion and earnings of US$1.97 a share.

AMD continues to deliver record results and now boasts sales that are twice as big as they were two years ago. It’s also been outperforming longtime nemesis Intel in the market for central processing units (CPUs). But the company is still well behind Nvidia Corp in so-called AI accelerators, which are used to train and run AI models.

Sales at AMD’s data center business nearly doubled to US$8.5 billion. Analysts had predicted a total of US$8.2 billion. PC and gaming-related sales shrank 8 percent to US$3.7 billion.

Like other makers of components for PCs, AMD is suffering from a side effect of the data center boom. AI servers require a massive amount of memory. That’s cut into the supply of chips available for laptops and desktop machines — and forced prices up. The total PC market will decline by a double-digit percentage next year, Su said during the conference call.

AMD is debuting new product ranges in both the CPU and accelerator markets. The Santa Clara, California-based company is also taking on Nvidia more directly with its Helios server design.

But Nvidia, the largest chipmaker and world’s most valuable company, hasn’t been standing still. It’s updating its own lineup at a fast pace and branching out into everything from software to networking to complete computers.