AMD Shares Slip Despite AI-Driven Q3 Revenue Outlook

Advanced Micro Devices (AMD) announced on Tuesday that it expects its third-quarter revenue to exceed Wall Street forecasts, fueled by increased demand for artificial intelligence (AI) chip infrastructure. However, in after-hours trading, AMD shares dropped about 4%, as the forecast did not fully meet some investor expectations, according to Reuters. Year to date, AMD shares have surged over 40%, significantly outperforming the roughly 12% gain in the benchmark chip index, as investors bet on AMD's pivotal role in the AI boom. Major companies like Microsoft, Meta Platforms, and OpenAI rely on AMD’s advanced processors for AI workloads, with cloud providers ramping up spending to expand data-center capacity. Meta recently increased its annual capital spending range by $2 billion, targeting $66 billion to $72 billion, while Microsoft projected a record $30 billion in capital expenditures for the first quarter of its fiscal year to meet soaring AI demand.

No China Sales Yet as Licenses Are Still Pending

AMD anticipates approximately $8.7 billion in revenue for Q3, with a margin of error of $300 million. This forecast surpasses the average analyst estimate of $8.30 billion surveyed by LSEG. However, it excludes any revenue from shipments of its MI308 AI chip to China, as export licenses remain under review by the U.S. government. In April, the U.S. imposed restrictions requiring licenses for exporting advanced AI processors to China. The Commerce Department is currently evaluating AMD’s applications, and the company plans to resume exports once approvals are granted. In mid-July, the administration quietly lifted the ban on specially tailored, “China-compliant” chips. Nvidia has already filed applications to resume sales of its H20 GPUs in China, and AMD intends to seek licenses for its MI308 accelerators, though approvals are still pending. Over the past decade, under CEO Lisa Su’s leadership, AMD has transformed into a major technology supplier, capitalizing on Intel’s missteps. AMD’s market capitalization now exceeds Intel’s by about $200 billion. Despite this, Nvidia’s growth remains far ahead, as its dominance in AI accelerators has made it the world’s most valuable company. AMD remains the second-largest producer of graphics chips, which are foundational for data-center AI accelerators, and its CPUs compete closely with Intel in both PC and server markets.

AMD Moves More Manufacturing to the U.S.

In May, CEO Lisa Su described China as a “large opportunity” for semiconductors and AI, despite tightening export controls and shifting tariffs. She emphasized the need for balance between national security export controls and broad adoption of AMD’s technology, highlighting the benefits for U.S. jobs and the economy. “There should be a balance between export controls for national security as well as ensuring that we get the widest possible adoption of our technology,” Su said on CNBC’s “Squawk on the Street.” She added that U.S. leadership in AI and widespread technology adoption is a primary objective and a strong position for AMD.

Related Market Movements

Meanwhile, Super Micro Computer Inc. shares fell 15% in after-hours trading after reporting disappointing fiscal Q4 results and issuing cautious guidance for the upcoming quarter. Despite a 7.5% year-over-year revenue increase for the quarter ending June 30, the company projected adjusted earnings below analyst expectations. Super Micro forecasts at least $33 billion in revenue for fiscal 2026, surpassing the $29.94 billion consensus. The company benefited from a surge in demand for Nvidia-equipped data-center servers in 2023, but growth has since moderated. After overcoming Nasdaq delisting risks and auditor changes, Super Micro shares have climbed about 88% this year, compared to a 7% gain in the S&P 500.

Frequently Asked Questions (FAQ)

Q: Why did AMD's shares drop despite a positive Q3 revenue outlook? A: AMD's shares dropped in after-hours trading because the Q3 revenue forecast, while exceeding expectations, did not fully meet some investors' expectations. This suggests a potential disconnect between market anticipation and the company's delivered guidance. Q: What is driving the increased demand for AMD's chips? A: The primary driver for increased demand is the burgeoning artificial intelligence (AI) sector. Major technology companies like Microsoft, Meta Platforms, and OpenAI are heavily investing in AI infrastructure, which relies on advanced processors like those produced by AMD. Q: What are the U.S. export restrictions concerning AI chips to China? A: The U.S. government has imposed restrictions requiring licenses for exporting advanced AI processors to China. AMD is awaiting approval for its MI308 AI chip shipments to China, while similar applications have been filed by competitors like Nvidia. Q: How has AMD's market position evolved under CEO Lisa Su? A: Under Lisa Su's leadership, AMD has transformed into a significant technology supplier, notably capitalizing on Intel's challenges. AMD's market capitalization has grown substantially, now exceeding Intel's by approximately $200 billion, though it still trails Nvidia in the AI accelerator market. Q: What impact do major companies' increased capital expenditures have on AMD? A: The significant capital expenditures by companies like Meta and Microsoft to expand data-center capacity directly translate to increased demand for AMD's AI chips, bolstering its revenue outlook.

Crypto Market AI's Take

This article highlights the complex interplay between technological advancement, market demand, and investor sentiment in the semiconductor industry, particularly within the context of AI. AMD's situation underscores how even positive revenue outlooks can be met with market scrutiny if they fall short of heightened investor expectations, especially in a sector as dynamic as AI chip manufacturing. For investors and traders navigating this space, understanding the nuances of supply chain dependencies, geopolitical factors like export controls, and the competitive landscape is crucial. Our platform at Crypto Market AI offers tools and analysis designed to help make sense of these intricate market dynamics, providing insights into companies poised for growth in the AI revolution and beyond. We also provide resources on AI Agents and Trading Bots which are increasingly influencing market strategies and operational efficiencies across various technology sectors, including those that support the semiconductor industry.

AMD shares slip despite AI-driven Q3 revenue outlook