AMD Stock Drops, But AI Chip Sales Outlook Rises

Advanced Micro Devices (AMD) shares fell nearly 8% in after-hours trading following the release of its third-quarter 2024 report, primarily due to fourth-quarter revenue guidance that missed Wall Street expectations. However, the company raised its outlook for 2024 data center artificial intelligence (AI)-enabling graphics processing unit (GPU) chip revenue, signaling strong demand for its products.

AMD's third-quarter results showed revenue of $6.8 billion, a 18% increase from the same period last year. Adjusted earnings per share (EPS) came in at $0.92, up 31% year-over-year. Despite the revenue guidance miss, AMD's AI chip sales outlook for 2024 has been raised to over $5 billion, reflecting the growing demand for AI technologies.

The company's data center segment, which includes AI chips, saw a 122% year-over-year increase in revenue, driven by higher sales of EPYC and Instinct data center products. AMD's client segment, which focuses on PC processors, also performed well, with revenue up 29% year-over-year. However, the gaming segment struggled, with revenue down 69% year-over-year due to decreased semi-custom revenue from console chips.

AMD's fourth-quarter guidance called for revenue of approximately $7.5 billion, plus or minus $300 million, representing year-over-year growth of approximately 22% and sequential growth of approximately 10%. Non-GAAP gross margin is expected to be approximately 54%. While this guidance fell short of Wall Street expectations, AMD's strong data center performance and robust AI chip sales outlook suggest potential for future growth.

As an investor, it's essential to consider the long-term prospects of a company rather than focusing solely on short-term setbacks. AMD's AI chip sales forecast indicates strong demand for its products, and the company's data center segment has shown impressive growth. While the gaming segment may be struggling, the overall picture suggests that AMD is well-positioned to capitalize on the growing demand for AI technologies.

In conclusion, while AMD's stock price may experience short-term volatility, the company's strong data center performance and robust AI chip sales outlook suggest that it is a compelling investment opportunity for those seeking exposure to the growing AI market. As an investor, it's crucial to maintain a long-term perspective and consider the underlying fundamentals of a company when making investment decisions.