AMD forecast AI chip sales which were so low that they led to a seven per cent nosedive in its stock in after-hours trading.
Lisa Su, the chief at the helm, disclosed to analysts that AMD is pinning its hopes on AI chip sales of about $4 billion (€3.74 billion)for the year 2024, a bump up of $500 million (€467.5 million) from earlier projections. Yet, this half-billion-dollar hike hasn't quite cut the mustard with Wall Street, which Nvidia's stratospheric AI chip sales have spoiled.
Creative Strategies analyst Ben Bajarin opined that investors were hankering for a more robust demand pipeline for AI-related products. "It's a slower ascent for them against Nvidia, and perhaps they're not making headway as swiftly as the market had hoped," he remarked.
The rush by enterprises to embrace generative AI has seen a pivot towards spending on AI server chips, leaving traditional server semiconductors, a significant slice of AMD's revenue pie, in the lurch.
"Overall AI demand has outstripped anyone's wildest dreams in 2024," Su proclaimed during the call. However, while some of AMD's CPUs do find themselves in cahoots with AI chips, the scales are tipped heavily in favour of the more advanced AI processors. AMD is playing catch-up with Nvidia, which lords over roughly 80 per cent of the burgeoning market for AI server semiconductors.
Nvidia's shares took a modest 2.3 per cent tumble in extended trading, while AMD projected a gross margin of about 53 per cent for the second quarter, just pipping the 52.9 per cent estimate at the post.
AMD's data centre business saw a sterling 80 per cent surge to $2.3 billion (€2.15 billion). Analysts had their bets hedged on AMD's MI300 series of AI processors to counterbalance the softness in the traditional server market.
The gaming market's fickle winds have further buffeted AMD. Newzoo, the market research firm, forecasts that personal computing and console gaming revenue growth will loiter below pre-pandemic levels until at least 2026.
Gaming revenue plunged 48 pe rcent to $922 million (€863.74 million). AMD had braced for a significant double-digit percentage drop in this segment, as the chips it crafts for gaming consoles like Microsoft's Xbox and Sony's PlayStation 5 have already crested the wave.
This year marks half a decade since the latest generation of gaming consoles hit the shelves. According to CFO Jean Hu, AMD's video game console revenue typically peaks after about four years.
Revenue from the embedded segment also took a 46 per cent hit, tumbling to $846 million (€792.12 million) AMD had previously warned that demand for this segment would remain tepid through the first half of the year, with ongoing inventory adjustments impacting revenue as clients declutter their chip stockpiles.
For the second quarter, AMD is forecasting revenue in the ballpark of $5.70 billion (around €5.34 billion), give or take $300 million, aligning with the average analyst estimate.
For the first quarter, AMD reported revenue of $5.47 billion (€5.13 billion), matching analysts' average estimate of $5.46 billion (€5.12 billion). Per-share earnings were reported at 62 cents, adjusted for stock-based compensation and other items, narrowly edging out the analysts' expected adjusted earnings of 61 cents a share.
