AMD's AI Business Forecast Boosted Amidst China Sales Concerns

AMD reported upbeat earnings with a strong forecast for its AI business, but declined to predict Chinese sales of its Instinct MI308 AI processor due to ongoing geopolitical tensions. The company's AI business is expected to grow despite the uncertainty.

Advanced Micro Devices (AMD) reported strong earnings and an optimistic forecast for its AI business, but declined to predict Chinese sales of its Instinct MI308 AI processor due to ongoing geopolitical tensions. The company's AI business is expected to grow despite the uncertainty.

In its Q3 earnings report, AMD projected third-quarter revenue of approximately $8.7 billion, surpassing Wall Street forecasts of an average $8.30 billion [1]. The anticipated revenue growth reflects strong demand for AI-related hardware, with enterprises accelerating investments in data-center infrastructure to support AI workloads [4]. Key clients such as Microsoft, Meta Platforms, and OpenAI are increasingly adopting AMD’s advanced processors for AI applications [1].

Despite the optimistic revenue outlook, AMD shares declined by about 4% in after-hours trading, as some investors appeared unimpressed by the guidance [5]. The projected revenue for the third quarter does not include sales from AMD’s MI308 AI chip in China, as export licenses remain under U.S. government review [1]. In April, Washington imposed restrictions requiring a license for the export of advanced AI chips to China, and while the administration has quietly allowed sales of “China-compliant” chips, approvals for AMD’s MI308 are still pending [1]. This regulatory uncertainty has created a temporary ceiling on AMD’s potential revenue in one of its largest markets. The company has stated it will resume shipments once the necessary approvals are granted [1].

AMD’s Q2 2025 earnings report showed mixed performance, with revenue reaching $7.7 billion and non-GAAP earnings per share at $0.48 [7]. While revenue exceeded expectations, the company missed profit forecasts, contributing to a cautious investor sentiment [3]. For the third quarter, AMD has provided a revenue guidance range of $8.7 billion ± $300 million, indicating confidence in maintaining its upward trajectory [3]. The forecasted growth represents a year-over-year increase of approximately 28% compared to the same period in 2024 [6].

The market reaction to AMD’s Q3 forecast highlights the broader challenges facing the semiconductor industry. Despite strong revenue projections, AMD reported a negative operating margin of -1.7% for the quarter, a significant drop from 4.6% in the prior year [1]. Analysts have pointed out that while revenue growth is positive, investors are increasingly focused on profitability and cost efficiency [1]. The company’s expenses in R&D, production, and global supply chain logistics remain under scrutiny [1].

AMD’s leadership, under CEO Lisa Su, has been instrumental in transforming the company into a major player in computing technology. Over the past decade, AMD has capitalized on Intel’s challenges and now holds a market capitalization exceeding that of Intel by around $200 billion [1]. However, the company still trails significantly behind Nvidia, which has emerged as the dominant force in AI accelerators [1]. AMD remains the second-largest producer of graphics chips, with its CPUs competing directly with Intel in both PC and server markets [1].

Su has emphasized the importance of balancing export controls with broad technology adoption, particularly in the context of AI and semiconductors. She has advocated for a framework that supports U.S. economic growth while addressing national security concerns [1]. This approach aligns with AMD’s strategy to expand its U.S. manufacturing footprint, further positioning the company to benefit from ongoing industry trends [1].

Despite the uncertainty surrounding Chinese sales, AMD's AI business is expected to grow. The company's strategic partnerships and product innovations position it to capture a significant share of the AI chip market. However, the company must address its profitability concerns and navigate the complexities of the global regulatory environment to achieve long-term success.

References:
[1] https://www.ainvest.com/news/amd-q3-revenue-forecast-surpasses-estimates-ai-demand-surge-2508/
[2] https://finance.yahoo.com/news/amd-nasdaq-amd-posts-better-212026769.html
[3] https://www.investors.com/news/technology/amd-stock-fiscal-q2-2025-earnings/
[4] https://www.ainvest.com/news/amd-strategic-position-ai-chip-market-regulatory-hurdles-rising-demand-2508/
[5] https://www.investors.com/news/technology/amd-stock-fiscal-q2-2025-earnings/
[6] https://finance.yahoo.com/news/amd-nasdaq-amd-posts-better-212026769.html
[7] https://www.investors.com/news/technology/amd-stock-fiscal-q2-2025-earnings/