AMD, like Intel, hopes to sell a ton of AI Chips, but expects revenue to take a hit, reveals earnings call

AMD, the second-largest producer of computer processors, has issued a subdued revenue projection for the ongoing quarter, aligning with Intel’s pessimistic outlook on the PC and data centre chip markets. According to a statement released on Tuesday, AMD anticipates first-quarter revenue to be around $5.4 billion, falling short of the average analyst estimate of $5.77 billion. The projected gross margin, representing the percentage of sales remaining after production costs deduction, is expected to be approximately 52 per cent, consistent with earlier forecasts. This forecast raises concerns about a potential slowdown in customer purchases within AMD’s core markets, including PCs, servers, game consoles, and programmable processors. Despite the company’s foray into the lucrative field of artificial intelligence accelerators, currently dominated by NVIDIA, it remains in the early stages of this expansion. Last month, AMD introduced the MI300 line of AI accelerators, with a sales projection exceeding $2 billion for the lineup in 2024. Following the announcement, AMD’s stock experienced a 2 per cent decline in extended trading, concluding the regular trading session at $172.06. Widely regarded as a top choice for investors seeking exposure to AI computing, AMD’s shares have been the second-best performers on the Philadelphia Stock Exchange Semiconductor Index this year, registering a 17 per cent gain after a similar performance in 2023. The pivotal question now revolves around whether AMD’s MI300 processors can pose a credible challenge to Nvidia and its H100, which witnessed a doubling of revenue in the latest fiscal year. In contrast, Intel has faced lacklustre demand in the programmable processors market, where it competes directly with AMD. In its recent quarterly report, Intel acknowledged weakening conditions in the data center processors market. Notably, three months ago, AMD had cautioned investors about slower demand for game console and embedded processors. For the fourth quarter, AMD reported earnings of 77 cents per share (excluding certain items), meeting estimates. Revenue for the quarter amounted to $6.17 billion, slightly surpassing the average projection of $6.13 billion. Specific divisions, such as PC chips and data centre sales, fell slightly short of estimates, while gaming computer-related revenue exceeded expectations. AMD holds the position of being the second-largest chipmaker for add-in graphics cards, transforming PCs into gaming machines. The company also supplies chips to Sony Group Corp. and Microsoft Corp. for their gaming consoles. It competes directly with NVIDIA in the market for PC add-in card chips and serves as Intel’s primary competitor in computer processors, a critical component for laptops, desktops, and server machines. The Santa Clara, California-based company remains closely watched in the evolving landscape of semiconductor technology. (With inputs from agencies)