ADVANCED Micro Devices (AMD) forecast third-quarter revenue above market estimates on Tuesday (Jul 30), banking on demand for its artificial intelligence (AI) chips staying strong.
Shares of the Santa Clara, California-based company rose 7 per cent in extended trading.
AMD benefits from large cloud operators buying the company’s AI and other chips. Some view the company as an alternative to Nvidia. Both Meta Platforms and Microsoft are customers of AMD’s MI300 line of AI chips. AMD CEO Lisa Su said the company was boosting its 2024 AI chip revenue forecast to US$4.5 billion from a previous target of US$4 billion during the conference call late Tuesday. The supply of such chips will remain tight to 2025, Su said.
Overall, AMD forecast revenue of US$6.7 billion, plus or minus US$300 million, for the third quarter compared with analysts’ average estimate of US$6.61 billion, according to LSEG data.
On an adjusted basis, the company forecast a gross margin of about 53.5 per cent for the third quarter, compared with estimates of 53.6 per cent.
In the second quarter, AMD’s data centre revenue, its biggest segment, jumped 115 per cent to US$2.8 billion, just topping estimates of US$2.79 billion, according to Visible Alpha.
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“We are in the picks and shovels cycle which is more about hardware infrastructure right now,” Creative Strategies CEO Ben Bajarin said. “Most enterprises are spending on AI software but only to trial and pilot programmes, (and have) not fully deploy them yet.”
Total revenue in the quarter rose 9 per cent to US$5.8 billion, which came in above estimates of US$5.72 billion.
AMD, which is among the largest providers of PC chips, also benefited from a recovery in the personal computer market after its worst slump in years. New computer AI features are reviving consumer demand.
In the second quarter, AMD reported revenue for PC chips of US$1.5 billion, compared with estimates of US$1.43 billion, according to Visible Alpha.
The company had adjusted second-quarter earnings of 69 US cents per share, topping analyst estimates of 68 US cents a share.
Adoption of generative AI technology has driven demand for powerful chips capable of handling the specific processing requirements of applications such as OpenAI’s ChatGPT. REUTERS
