Advanced Micro Devices (AMD) announced on Tuesday that it expects third-quarter revenue to exceed Wall Street forecasts, driven by a surge in demand for artificial intelligence (AI) chip infrastructure. Despite this positive outlook, AMD’s shares fell about 4% in after-hours trading as some investors reacted to delays in China-related sales. Year to date, AMD shares have surged over 40%, significantly outperforming the benchmark chip index's roughly 12% gain. This growth reflects investor confidence in AMD’s pivotal role in the AI boom. Major companies such as Microsoft, Meta Platforms, and OpenAI rely on AMD’s advanced processors to power AI workloads. Cloud providers are ramping up capital expenditures to expand data-center capacity to meet growing AI demands. For instance, Meta recently increased the low end of its annual capital spending range by $2 billion, targeting between $66 billion and $72 billion. Similarly, Microsoft projected a record $30 billion in capital outlays for the first quarter of its fiscal year to keep pace with AI growth.

No China Sales Yet as Licenses Are Still Pending

For Q3, AMD anticipates revenue around $8.7 billion, plus or minus $300 million, beating the average analyst forecast of $8.3 billion. However, this outlook 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 export curbs requiring licenses for sending advanced AI processors to China. The Commerce Department is currently assessing AMD’s applications. AMD stated it will resume exports once approvals are granted. In mid-July, the U.S. administration quietly reversed the ban on specially tailored, "China-compliant" chips. Nvidia has filed applications to resume sales of its H20 GPUs to China, and AMD plans 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 to significantly improve its market position. AMD’s market capitalization now exceeds Intel’s by approximately $200 billion. However, 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 directly 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 rules and shifting tariff plans. She emphasized the need to balance export controls for national security with maximizing technology adoption. “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 told CNBC’s “Squawk on the Street.” She added that U.S. leadership in AI and widespread adoption is the primary objective and a strong position for AMD. Su acknowledged the delicate balance between restricting chip exports and providing access to them.

Related Market Update: Super Micro Shares Drop

Separately, Super Micro Computer Inc. shares fell 15% in extended trading after the server maker reported disappointing fiscal fourth-quarter results and issued cautious guidance for the upcoming quarter. Revenue rose 7.5% year-over-year in the quarter ended June 30, but adjusted earnings and sales projections fell short of analyst expectations. The company recently avoided Nasdaq delisting following delays in financial filings and auditor changes. Shares have climbed about 88% this year, outperforming the S&P 500’s 7% gain.

Frequently Asked Questions (FAQ)

AMD's AI Chip Business and Revenue

Q: What is driving AMD's Q3 revenue to exceed forecasts? A: AMD's Q3 revenue is expected to exceed forecasts primarily due to a surge in demand for artificial intelligence (AI) chip infrastructure. Q: What are AMD's Q3 revenue projections? A: AMD anticipates Q3 revenue to be around $8.7 billion, with a margin of error of plus or minus $300 million. This figure beats the average analyst forecast of $8.3 billion. Q: Does AMD's Q3 revenue forecast include sales to China? A: No, the Q3 revenue outlook specifically excludes any revenue from shipments of its MI308 AI chip to China, as export licenses are still under review by the U.S. government. Q: What is the reason for the delay in AMD's China sales? A: The delay is due to U.S. government export curbs, which require licenses for advanced AI processors to be sent to China. AMD is awaiting approval from the Commerce Department for its applications. Q: Has the U.S. ban on China-compliant chips been reversed? A: Yes, in mid-July, the U.S. administration quietly reversed the ban on specially tailored, "China-compliant" chips, allowing companies like AMD to seek licenses for their products. Q: How has AMD's stock performed year-to-date? A: AMD's shares have surged over 40% year-to-date, significantly outperforming the benchmark chip index. Q: Which major companies utilize AMD's processors for AI workloads? A: Major companies such as Microsoft, Meta Platforms, and OpenAI rely on AMD's advanced processors to power their AI workloads. Q: How is the demand for AI chip infrastructure impacting capital expenditures of cloud providers? A: Cloud providers are increasing their capital expenditures to expand data-center capacity to meet the growing AI demands. Examples include Meta increasing its annual capital spending range and Microsoft projecting record capital outlays. Q: How does AMD position itself in the semiconductor market compared to competitors? A: AMD has transformed into a major technology supplier and is the second-largest producer of graphics chips, crucial for data-center AI accelerators. Its CPUs also compete directly with Intel in the PC and server markets. Q: What is AMD's CEO's perspective on the China market and export controls? A: AMD's CEO, Lisa Su, views China as a "large opportunity" for semiconductors and AI, while emphasizing the need to balance national security export controls with maximizing technology adoption.

Crypto Market AI's Take

The recent performance and outlook for Advanced Micro Devices (AMD) highlight a key trend in the technology sector: the insatiable demand for AI-accelerating hardware. As major tech players like Microsoft and Meta Platforms significantly increase their capital expenditures to bolster AI capabilities, companies like AMD are positioned to benefit from this infrastructure build-out. This surge in demand for specialized chips underscores the growing importance of AI in transforming industries, mirroring the disruptive potential that cryptocurrencies and blockchain technology bring to the financial landscape. At Crypto Market AI, we continuously analyze these intersections of technology and finance. Our platform leverages AI to provide deep market insights, helping investors navigate the complexities of both the AI hardware sector and the burgeoning digital asset markets. We offer tools and data that can help identify companies poised for growth driven by technological advancements, much like AMD's current position in the AI chip race.

AMD shares slip despite AI-driven Q3 revenue outlook