AMD slides after AI growth outlook underwhelms investors
It’s not uncommon for AMD to report positive results and still see its stock slump.
Advanced Micro Devices (AMD) saw its shares drop after announcing a sales outlook that fell short of investors' expectations, highlighting the demand for higher returns from the growth of artificial intelligence data centers. The company projected third-quarter revenue of $13 billion, give or take $300 million, in a statement released on August 4.
While analysts had averaged an estimate of $12.5 billion, with some Wall Street projections surpassing $13 billion, according to Bloomberg data. AMD's stock experienced a decline of up to 7.2% to $481.06 on the New York market after trading commenced. This reaction indicates that the company needs to demonstrate more rapid growth to justify its valuation.
AMD's stock has more than doubled in 2026, outperforming a broader rally, following its emergence as a key competitor to Nvidia in artificial intelligence processors. However, in July, CEO Lisa Su unveiled new products that the company claimed would outperform Nvidia's offerings, taking a more aggressive stance in a market predicted to reach $1.4 trillion by 2030.
This heightened investor expectations. During a conference call on August 4, Su informed analysts that AMD anticipates its data center revenue to "more than" double in 2027, though she refrained from providing exact figures. "Without going into exact numbers," Su said, the growth could ultimately exceed 100%. Long-term, AMD is positioned to surpass its earlier targets of 35% annual revenue growth and earnings per share of $20.
In the second quarter, AMD's sales rose by 50% to $11.5 billion, with profit, excluding certain items, at $1.66 per share, exceeding analysts' estimates of $11.3 billion in revenue and $1.62 per share in profit. AMD's data center business saw sales more than double to $6.7 billion, surpassing analysts' average prediction of $6.6 billion.
Personal computer and gaming-related sales increased by 6% to $3.8 billion. While AMD's earnings reports have often disappointed Wall Street, even when the company beat estimates, the company's report was published late in the tech earnings season. Strong performances by AMD's customers and rivals, including Intel, had contributed to expectations.
The rapid spending on data centers is driving demand for processors and other equipment. Capital expenditures by the largest owners of data centers are expected to surge to over $1 trillion by 2027, as per Bernstein analysts' estimates. Based in Santa Clara, California, AMD manufactures accelerator chips utilized for training and running AI software, a sector pioneered by Nvidia, which retains its market dominance.
According to Emarketer analyst Jacob Bourne, AMD has already established itself as a significant second supplier to Nvidia in AI accelerators. However, there remains a question of whether AMD can maintain its position alongside Nvidia in the broader market for AI infrastructure. AMD also produces central processing units (CPUs), where it is rapidly closing in on the long-standing leader Intel.
The CPU market has experienced a resurgence in data centers, supporting AI services. Despite the AI data center expansion's upside, AMD faces challenges due to memory chip shortages affecting various device manufacturers, causing higher prices and reduced supply for personal computers, AMD's largest market by volume.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
