Advanced Micro Devices (NASDAQ: AMD) stock surges on strong Q2 results, posing a threat to NVIDIA in the AI race.
Shares of Advanced Micro Devices, Inc. (AMD) jumped 1.66% in the pre-market trading Wednesday after the chipmaker posted better-than-expected earnings for the second quarter and showcased significant advancements in artificial intelligence (AI) computing, putting it in fierce competition with NVIDIA Corporation (NASDAQ: NVDA).
Both sales and profits surpassed the analysts’ projections in the second quarter. Notably, AMD accelerators, a type of processor that enhances AI software development, are garnering substantial interest from customers. This has sparked optimism that AMD can gain ground on NVIDIA and capitalize on the widespread adoption of AI across industries.
During a conference call with analysts, Chief Executive Officer Lisa Su stated that the market for AI accelerators in data centers is projected to exceed $150 billion by 2027. She further revealed that customer engagements with the AMD AI products rose more than seven times in the last quarter as clients prepared to strengthen their infrastructure.
The upbeat outlook has propelled AMD shares up nearly 4% in late trading, building on an impressive 82% climb year-to-date. This makes AMD the second-best-performing member of the Philadelphia Stock Exchange Semiconductor Index. Its AI prospects have fueled much of that rally.
The company reported earnings of 58 cents per share for the second quarter, excluding some items, beating the average analyst projection of 57 cents. Revenue came in at $5.36 billion, compared to a prediction of $5.32 billion.
AMD projects third-quarter revenue at $5.4 billion to $6 billion, surpassing the average analyst estimate of $5.84 billion. The midpoint of this range would represent a gain of about 2.5% from the same period a year earlier, marking the end of a two-quarter retreat.
Furthermore, the AMD PC chip division performed better than expected in the second quarter, signifying a robust rebound from the pandemic-induced slump. The AMD PC chip unit revenue reached $998 million last quarter, outperforming the analysts’ estimate of $840.9 million. Its gaming division generated $1.58 billion, slightly below the $1.62 billion projection.
However, the AMD data center business has taken longer than expected to recover from a downturn, with sales amounting to $1.32 billion last quarter, falling short of the average estimate of $1.4 billion. The company is optimistic about a second-half rebound, especially in the fourth quarter, even though some areas remain sluggish.
AMD plans to introduce its MI300 accelerator chip to the market during the final three months of the year, aiming to meet the surge in AI demand. Su stated that customer interest in the MI300 accelerators is very high, with multiple clients eager to deploy them as soon as possible.
Notably, the path to boosting AI accelerator sales faces a hurdle in the form of export restrictions to China. In response, Su hinted at AMD’s contemplation of a strategy similar to NVIDIA’s, which involves the creation of a less-powerful product in compliance with US regulations.
Su stated, “Our plan is to, of course, be fully compliant with US export controls, but we do believe there’s an opportunity to develop a product for our customer set in China that is looking for an AI solution.”
Peter Williams, a financial writer with over five years of experience, specializes in covering stock market movements, bond markets, commodities, and macroeconomic trends.
