AMD's AI chip revenue forecast miss disappoints investors, shares fall 7 pc

Advanced Micro Devices (AMD) announced its projection for AI chip sales in 2024 on Tuesday, but the figures failed to meet investor expectations, resulting in a sharp decline of approximately 7 per cent in the company's stock during extended trading.

AMD's Chief Executive Officer, Lisa Su, disclosed that the company expects AI chip sales to reach $4 billion for the year 2024, marking a $500 million increase from the previous estimate.

Despite this upward revision, the forecast fell short of the ambitious projections set by Wall Street analysts, particularly when compared to the strong AI chip sales reported by competitor Nvidia.

According to Ben Bajarin, CEO of Creative Strategies, investors were anticipating a stronger demand outlook for AI-related products from AMD.

However, the slower pace of adoption compared to Nvidia may have contributed to the disappointment among investors.

AMD faces challenges in catching up to Nvidia's position in the expanding market for artificial intelligence server semiconductors.

The surge in demand for AI-driven technologies has led to a shift in spending priorities among enterprises, favouring AI server chips over traditional server semiconductors.

This trend has impacted AMD's revenue, as its processors are less suited to handle the complex tasks associated with AI compared to specialised AI chips.

Despite acknowledging the overall strong demand for AI technologies, Lisa Su noted that AMD's current ratio of AI processors to central processors (CPUs) is skewed towards the former.

While AMD's data centre business witnessed substantial revenue growth, driven by its MI300 series of AI processors, it still trails behind Nvidia, which commands approximately 80 per cent of the AI server semiconductor market.

In addition to the AI chip forecast, AMD provided insights into its gaming segment, which saw a decline in revenue.

Revenue from gaming fell by 48 per cent, attributed to softening demand in the gaming market and the natural decline in revenue from gaming consoles such as Microsoft's Xbox and Sony's PlayStation 5.

The decline in gaming revenue has further complicated the challenges faced by AMD.

Looking ahead, AMD offered a revenue forecast of approximately $5.70 billion for the second quarter of the fiscal year, in line with analysts' estimates.

Despite reporting revenue of $5.47 billion for the first quarter, slightly surpassing analysts' expectations, AMD's stock faced downward pressure due to concerns over its AI chip revenue outlook and challenges in the gaming market.

(With inputs from Reuters)