Shares of Advanced Micro Devices Inc. (NASDAQ:AMD) dropped by as much as 8.1% following the chipmaker’s underwhelming forecast for artificial intelligence processors, a market currently dominated by Nvidia Corp. (NASDAQ:NVDA).
AMD predicted that its MI300 lineup, comprising AI accelerators, would generate approximately $4 billion in revenue for the year. While this figure represents an increase from the previous projection of $3.5 billion, it fell short of some investors’ expectations, who had anticipated figures as high as $8 billion, according to analysts.
Despite being regarded as a key contender to challenge Nvidia in the accelerator market, AMD faces challenges in catching up with its rivals. Chief Executive Officer Lisa Su acknowledged the company’s struggle to meet demand due to supply constraints, stating that additional supply would facilitate meeting existing demand.
The company also provided a subdued revenue forecast for the current quarter, expecting sales of around $5.7 billion, slightly below the average analyst estimate of $5.72 billion. Weak demand for chips used in video game hardware has contributed to this stagnation in growth.
Following this announcement, AMD’s shares plummeted to as low as $145.63 in New York, marking the most significant intraday decline since April 4. The stock had closed at $158.38 on Tuesday, reflecting a 7.4% increase for the year.
AMD’s report comes on the heels of a pessimistic forecast from Intel Corp., which anticipates sluggish demand in the first half of the year. Despite Intel’s larger overall sales, it expects to generate only about $500 million in revenue from AI accelerators this year. In comparison, Nvidia continues to maintain a significant lead, with its data center business projected to achieve revenue of $95.9 billion in the current fiscal year.
Su expressed optimism that supply constraints with the MI300 line would ease later in the year but acknowledged their impact in the second quarter.
In the first quarter, AMD reported earnings of 62 cents per share, excluding certain items, and revenue of $5.47 billion, slightly surpassing analyst estimates. The company’s PC chip division generated revenue of approximately $1.4 billion, exceeding estimates, while data center sales were in line with projections at $2.3 billion. Gaming computer-related revenue fell short of expectations at $922 million.
While AMD primarily derives revenue from personal computers and server microprocessors, its server market presence has faced challenges as data center operators increasingly invest in Nvidia chips. Nonetheless, AMD remains competitive in various sectors, including graphics processors for gaming and programmable logic chips.
The company expects its gross margin for the second quarter to be around 53%, consistent with predictions.
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