AMD Shares Slide Despite Strong Forecast as AI Growth Expectations Remain High
Advanced Micro Devices (AMD) shares fell sharply on Wednesday after the chipmaker’s revenue forecast failed to satisfy investors looking for stronger evidence that the multibillion-dollar artificial intelligence (AI) investment boom will deliver faster growth.
The stock dropped 6.6 per cent in early trading, putting the company on track to lose nearly $59 billion in market value. The decline came despite AMD issuing a third-quarter revenue forecast that exceeded analysts’ expectations, underscoring the elevated expectations surrounding the company as competition in the AI chip market intensifies.
Investor Expectations Outpace Forecast
AMD forecast third-quarter revenue of approximately $13 billion, plus or minus $300 million, surpassing analysts’ average estimate of $12.52 billion, according to LSEG data. Even so, investors appeared unconvinced that the guidance justified the company’s recent share price rally.
Stacy Rasgon, an analyst at Bernstein, said market expectations had risen following Intel’s recent earnings, while investors already held an optimistic outlook for AMD.
Analysts at TD Cowen described AMD’s quarterly results and outlook as “objectively good” but noted that the company faced an exceptionally high benchmark after announcing several major AI customer wins and enjoying a sharp rise in its share price.
Nvidia Gains as SpaceX Chooses Rival Chips
AMD also came under pressure after SpaceX Chief Executive Elon Musk announced that the company would build its computing infrastructure exclusively using Nvidia chips. The decision boosted Nvidia shares by more than 3 per cent in early trading while adding to concerns about AMD’s competitive position in the rapidly expanding AI infrastructure market.
Last month, AMD strengthened its AI credentials by signing agreements with Anthropic and Core Scientific as it seeks to narrow the gap with industry leaders Nvidia and Intel. Nevertheless, investors continue to demand stronger proof that the company can translate those partnerships into sustained revenue growth.
Data Centre Business Remains a Bright Spot
Chief Executive Lisa Su said AMD expects its data centre revenue to more than double by 2027. She also projected total company revenue growth above the firm’s previously announced target of more than 35 per cent.
AMD’s data centre business generated $6.72 billion in revenue during the latest quarter, more than doubling from a year earlier and exceeding analysts’ expectations.
However, analysts at J.P. Morgan cautioned that supply constraints remain a potential challenge. They pointed to continued pressure on Taiwan Semiconductor Manufacturing Co.’s N3 manufacturing process and CoWoS advanced chip packaging technology, with tight capacity expected to persist through 2027.
High Valuation Raises the Stakes
AMD’s shares have more than doubled this year as investors increasingly view the company as the leading alternative to Nvidia in AI chips. That strong performance has also raised expectations for every earnings report, making it more difficult for the company to impress investors even when financial results exceed forecasts.
The latest market reaction highlights how companies benefiting from the AI boom are being judged not only on strong earnings but also on their ability to demonstrate sustained long-term growth in an increasingly competitive semiconductor market.
With inputs from Reuters