AMD slides on muted forecast for AI processors

Major player: The entrance to AMD’s headquarters in Santa Clara, California. The company is seen as a leading contender to challenge Nvidia in the market for accelerators, which help develop chatbots and other tools. — Bloomberg

NEW YORK: Advanced Micro Devices Inc (AMD) shares declined as much as 9.1% in extended trading after the chipmaker gave a disappointing forecast for artificial intelligence (AI) processors, a lucrative market now dominated by Nvidia Corp.

The company projected that its MI300 lineup, a family of so-called AI accelerators, would generate about US$4bil in revenue this year. Though that’s up from an earlier prediction of US$3.5bil, some investors were hoping for as much as US$8bil, according to analysts.

AMD is seen as a leading contender to challenge Nvidia in the market for accelerators, which help develop chatbots and other tools by bombarding them with data.

But it’s playing catch-up in the industry. One challenge has been making enough of the chips to meet demand, chief executive officer Lisa Su said.

“We are tight on supply,” she said. “There’s no question that, in the near term, if we had more supply, we have demand.”

AMD also gave a tepid revenue forecast for the current quarter. Sales will be approximately US$5.7bil in the period, the Santa Clara, California-based firm said.

That compares with an average analyst estimate of US$5.72bil. Weak demand for chips used in video game hardware has hampered growth.

The shares fell as low as US$143.90 in late trading after the results were released. They had closed at $158.38 on Tuesday, up 7.4% for the year.

The AMD report follows a downbeat forecast last week from Intel Corp, which said it expects demand to remain sluggish in the first half of the year.

AMD is expecting growth in the range of 6% in the current quarter, better than the roughly flat projection of its larger rival.

Though Intel is still bigger than AMD in overall sales, it only expects to get about US$500mil in revenue from AI accelerators this year.

Nvidia remains far ahead of both companies. Its data centre business is on course to chalk up revenue of US$95.9bil in its current financial year, up two-fold from a year earlier and higher than the total revenue of Intel and AMD combined.

Su said that the supply constraints with its MI300 line should ease later this year, but they are having an impact in the second quarter.

In the first quarter, AMD had earnings of 62 US cents a share, excluding some items, and revenue of US$5.47bil. That performance compared with an estimated 61 US cents in profit and US$5.45bil in sales.

AMD’s PC chip division had revenue of about US$1.4bil, compared with a US$1.29bil estimate.

Data centre sales came in at US$2.3bil, in line with the average projection. Gaming computer-related revenue, meanwhile, was US$922mil. Analysts had expected sales of US$965.5mil.

Like Intel, AMD still gets most of its revenue from personal computer and server microprocessors.

The once-solid server market has been less reliable recently because data centre operators have plowed much of their budgets into Nvidia chips – the very area AMD is now making its own play for.

Investors betting on AMD’s AI prospects had set off a rally earlier this year, though the stock cooled in recent months. The announcement of a next-generation Nvidia chip has weighed on the shares.

AMD also competes with Nvidia in the market for graphics processors that improve the images in video games.

It’s the biggest rival of Intel in both server and PC processors, as well as in programmable logic chips, which can be reconfigured with software after they’re installed.

And it supplies Microsoft Corp and Sony Corp with the main component in their game consoles.

AMD said that its gross margin – the percentage of sales remaining after deducting the cost of production – will be about 53% in the second quarter, matching predictions. — Bloomberg

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