AMD chips away at investor confidence with weak forecast

The stock prices of AMD tumbled after the chip manufacturer predicted quarterly sales below expectations, attributing the decline to a sluggish PC market. This overshadowed the company's positive outlook regarding a potential recovery in the chip market by the latter half of 2023. Furthermore, AMD fell short of analysts' projections for sales of PC and data center chips in Q1, leading to a drop of more than 6% in its shares during after-hours trading.

In contrast, AMD's competitor Intel Corp reported a different outcome, as their shares experienced a nearly 3% increase during after-hours trading. Intel had recently announced that the PC market is expected to rebound during the second half of the year, which is likely to improve their profit margins.

Market analysts had been closely monitoring AMD's rise in the data center market, particularly after Intel faced a delay in launching its powerful data center processor, Sapphire Rapids, which gave AMD an opportunity to gain a foothold in the industry. However, some analysts now suggest that AMD's growth in this sector may be slowing down.

"I think AMD's days of taking large swaths of share will likely be over, and it will probably see a more aggressive market for data center competing with Intel. AMD has great products in data center, but Intel still has a lot of customers who are still using Intel and deep (customer) relationships,” stated Anshel Sag, analyst at Moor Insights & Strategy, according to a Reuter's report.

Despite concerns about the data center market, AMD CEO Lisa Su expressed optimism during a conference call with investors, stating that the first quarter marked the low point for both the company's PC business and the industry as a whole.

"We remain confident in our ability to grow in the second half of the year," she stated.

Lisa Su also shared details about AMD's upcoming product, the MI300 chip, which is set to rival Nvidia Corp's flagship chips in the artificial intelligence (AI) market. According to Su, customer interest in the MI300 chip is on the rise, and the company is expecting to start generating revenue from cloud AI customers in the fourth quarter of this year, with a more significant impact expected in 2024.

Su emphasized that success for AMD would be achieving a substantial portion of the overall AI opportunity, indicating the company's ambitious goals in the AI market.

It is worth noting that Nvidia currently holds the largest share of the AI market, and many analysts believe that the company has a formidable grip on its dominant position.

According to Kinngai Chan, an analyst at Summit Insights Group, the MI300 chip is likely to be utilized primarily for special projects or on a case-by-case basis. Chan also suggested that the MI300 may not match the performance of Nvidia's latest H100 data center chip, especially when it comes to large language model applications like ChatGPT.

What does the weather look like for AMD?

AMD's forecast for the current quarter includes estimated revenue of around $5.3 billion, plus or minus $300 million. However, this forecast falls short of the expectations of analysts polled by Refinitiv, who were anticipating revenue of $5.48 billion.

In the first fiscal quarter ending on April 1, AMD reported revenue of $5.35 billion, which surpassed the estimated revenue of $5.30 billion.

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