ADVANCED Micro Devices (AMD) slid in late trading after the chipmaker’s revenue forecast missed analysts’ estimates, a sign its artificial intelligence (AI) sales are growing more slowly than some had anticipated.
Revenue will be roughly US$7.5 billion in the fourth quarter, the company said on Tuesday (Oct 29). Analysts estimated US$7.55 billion on average. Though the company now expects to get more than US$5 billion in sales from so-called AI accelerators this year – up from a previous forecast of US$4.5 billion – some analysts and investors had been looking for a bigger bump.
AMD is playing catch-up with Nvidia in the lucrative market for AI computing chips. The company is now generating billions of US dollars from that type of product – a rapid rise from a year ago – but remains well short of the tens of billions of US dollars that its rival is raking in.
AMD shares fell about 7 per cent in late trading on Tuesday. They were up 13 per cent this year, closing at US$166.25 in New York.
AMD’s third-quarter revenue rose 18 per cent to US$6.8 billion, beating an average estimate of US$6.7 billion. Profit, minus certain items, increased to 92 US cents a share, in line with projections.
AMD’s new MI300 accelerator products, which compete with Nvidia chips, have emerged as one of its biggest sales engines. But the growth has been hampered by the availability of supply. Like most companies in the industry, AMD no longer owns its own plants, opting instead to outsource production to Taiwan Semiconductor Manufacturing Company.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Investors track AMD’s performance as an indicator of overall demand for AI-related hardware. Massive spending by companies such as Amazon.com’s AWS and Microsoft on this still-new type of computing infrastructure has upended the industry. The concern among investors is that AI services are not yet big moneymakers, which may make it harder for companies to continue justifying the expense of buying the chips.
In addition to being Nvidia’s biggest rival in AI accelerators, AMD also competes with that company in graphics chips used by computer gamers. And it goes head-to-head with Intel Corp. in personal computer and server processors.
AMD’s data-centre unit had sales of US$3.5 billion last quarter, more than double the total from a year earlier and slightly above estimates. PC chips brought in US$1.9 billion, up 29 per cent.
AMD also supplies custom processors for Microsoft and Sony Group for their game consoles. That unit has seen weaker sales, hurt by the current generation of game machines nearing the end of their life cycles. Revenue fell 69 per cent to US$462 million, missing estimates.
AMD also predicted a fourth-quarter adjusted gross margin – the percentage of sales remaining after deducting the cost of production – that was just shy of projections. BLOOMBERG