AMD Earnings Miss Estimates Amid AI Chip Push

Chip Giant Navigates Export Controls and Fierce Competition

Advanced Micro Devices (AMD) reported quarterly earnings that fell short of analyst expectations, causing its stock to dip in after-hours trading. The company, a key player in the artificial intelligence hardware market, is facing headwinds from U.S. export restrictions on its high-end chips, particularly impacting sales to China.

AI Business Faces Setback from Export Restrictions

For the quarter ending in June, AMD posted adjusted earnings per share of 48 cents, missing the anticipated 49 cents. Revenue, however, exceeded forecasts at $7.69 billion, compared to the expected $7.42 billion. The company anticipates current-quarter sales to reach approximately $8.7 billion, plus or minus $300 million, against analyst projections of $8.3 billion.

The company’s AI-focused business experienced a year-over-year decline in revenue. This downturn is largely attributed to U.S. export restrictions that effectively halted sales of its MI308 AI chips to China. Previously, the MI308’s export to China was blocked in April, costing AMD an estimated $800 million in the June quarter.

CEO Lisa Su explained the situation to analysts, stating, “AI business revenue declined year over year as US export restrictions effectively eliminated MI308 sales to China, and we began transitioning to our next generation.” While the Trump administration has signaled potential waivers, AMD’s current outlook does not incorporate any revenue from the MI308 chip, with license applications still under review by the Department of Commerce.

New AI Chips Touted as Competitive

Despite these challenges, AMD is pushing forward with its next-generation AI hardware. The company recently unveiled its Instinct MI400 AI chips, slated for market release next year. Notably, OpenAI CEO Sam Altman has committed to adopting AMD’s upcoming GPUs.

Su also highlighted the competitive nature of AMD’s newest AI chip, the Instinct MI350, stating it is comparable to Nvidia’s GB200 chips for both AI model training and inference. “Seven of the top ten model builders and AI companies use Instinct,” she added, underscoring customer adoption.

Other Segments Show Strong Growth

Beyond its AI offerings, AMD’s core businesses demonstrated robust performance. The data center segment, which includes central processing units (CPUs) that compete with Intel, saw a 14% annual increase in revenue, reaching $3.2 billion. This segment is crucial as it powers traditional servers.

The Client and Gaming division experienced a significant surge of 69% year-over-year, generating $3.6 billion in revenue. This growth was propelled by strong demand for AMD’s Ryzen Zen 5 desktop CPUs and custom chips for game consoles, alongside its gaming GPUs. Client revenue alone climbed 57% to $2.5 billion, while gaming revenue soared 73% to $1.1 billion, surpassing expectations.

Globally, the semiconductor market is projected to grow by 13.1% in 2024, reaching $689 billion, according to the Semiconductor Industry Association (SIA 2024).