AMD shares are sinking on expectations as the PC market remains weak

(Reuters) – Shares of Advanced Micro Devices (AMD.O) fell on Tuesday after the chipmaker forecast lower-than-estimated quarterly sales due to a weak PC market, overshadowing the company’s optimism that the chip market will start to recover in the second half of the year. general. 2023.

The company also missed analyst estimates for first-quarter PC and data center chip sales, and its shares fell more than 6% in extended trading.

That stands in contrast to rival Intel Corp (INTC.O), whose shares are up nearly 3% in extended trade. Intel said last week that the PC market will start to pick up in the second half, increasing Intel’s margins with it.

While analysts watched AMD grab market share in the data center after Intel delayed ramping up shipment of its most powerful data center processor chip code, called Sapphire Rapids, by more than a year, some said they see AMD stalled now.

“I think AMD’s days of acquiring large portions of the stock will likely be over, and it will likely see a much stronger market for the data center that competes with Intel,” said Anshel Sag, analyst at Moor Insights & Strategy. “AMD has great products in data centers, but Intel still has a lot of customers who still use Intel and deep relationships (with customers).”

However, AMD CEO Lisa Su told investors on a conference call that the first quarter was the bottom of the market for the company’s PC business and industry.

“We remain confident in our ability to grow in the second half of the year,” she said.

Part of that growth will come from a chip called the MI300, Su said, which will compete with Nvidia Corp. (NVDA.O)’s leading artificial intelligence chips. Su said that customer interest in the chip is growing.

“We believe we will start to grow revenue in the fourth quarter with cloud AI customers, and then it will be more feasible in 2024,” Su said. “The success for us is to capture a large part of the overall AI opportunity,” she added.

Nvidia owns the bulk of the AI ​​market, and analysts believe it has a strong hold on its position.

“We believe the MI300 will be mainly used for special projects or on a case-by-case basis,” said Qinghai Chan, an analyst at Summit Insights Group, adding that the MI300 is likely to be inferior to Nvidia’s latest H100 data center chip for the large language model. Applications, such as ChatGPT.

AMD expects revenue for the current quarter to be about $5.3 billion, plus or minus $300 million. Analysts polled by Refinitiv expected revenue of $5.48 billion.

Revenue in the first quarter of the fiscal year ending April 1 was $5.35 billion, compared to estimates of $5.30 billion.

Additional reporting by Shafi Mehta in Bengaluru; Edited by Magu Samuel

Our standards: Thomson Reuters Trust Principles.