AMD Braces for Tariff Impact as DeepSeek Concerns Persist

AMD is set to report its Q4 earnings this week, with investors bracing for the potential impact of recent tariffs and lingering concerns over the DeepSeek AI model. The chipmaker has been rushing to stockpile its next-generation GPUs in the U.S. before the tariffs take effect on January 20, 2025, to avoid a potential 40% price increase when the tariff policy is applied. However, the long-term impact on AMD's market share and consumer demand remains uncertain.

The tariffs, which are primarily targeted at China but also affect other countries, could lead to a significant price hike for AMD's graphic cards, including the Radeon 9000 series. This price hike could have a substantial effect on AMD's earnings, as the company relies heavily on global supply chains for manufacturing. To mitigate the potential price hikes, AMD has implemented several strategies, such as accelerating production and shipping schedules and stockpiling inventory.

However, the recent emergence of the DeepSeek AI model has added another layer of uncertainty for AMD and other tech companies. The open-source LLM developed by DeepSeek in just a couple of months at a much lower cost than competitors has raised concerns about the potential disruption of America's AI lead. Several AI-related names sold off last week as investors weighed the implications of this new model.

Northland Capital analyst Gus Richard has brushed off AI demand concerns, noting that the biggest cloud service providers (CSPs) are not adjusting their spending plans. However, he also flagged recent rumors that Microsoft Corp. has grown frustrated with AMD, likely related to the company's open-source software, which is not as well developed as Nvidia Corp.'s Cuda. Despite these concerns, Richard maintains an Outperform rating on AMD shares with a price target of $175.




In conclusion, AMD's Q4 earnings report will be closely watched by investors as the company navigates the challenges posed by recent tariffs and the emergence of the DeepSeek AI model. While AMD has implemented strategies to mitigate the potential price hikes from tariffs, the long-term impact on the company's market share and consumer demand remains uncertain. Investors will be looking for guidance from AMD on how it plans to address these challenges and maintain its competitive position in the market.