Advanced Micro Devices said it expects first-quarter revenue to come in above market expectations, citing robust demand for its artificial intelligence chips as data center operators expand capacity to support AI workloads. Despite the upbeat sales forecast, the company's shares tumbled over 4% in extended trading after the announcement.
AMD projected revenue of about $9.8 billion for the first quarter, plus or minus $300 million. That guidance compares with an analysts' average estimate of $9.39 billion, according to data compiled by LSEG.
Headquartered in Santa Clara, California, AMD is widely regarded as the nearest challenger to the AI chip dominance held by Nvidia, as big technology companies and governments worldwide continue to increase spending on AI hardware. In addition to its AI accelerators, AMD is a major supplier of central processing units for data centers, which are paired with high-end graphics processors within server configurations.
The rapid enlargement of data center capacity has supported demand for server CPUs, a trend that has benefited AMD as it continues to gain share from rival Intel. The company has captured more market share while Intel has struggled to fully meet server CPU demand because of supply limits tied to its in-house production.
Analysts expect AMD to encounter fewer manufacturing bottlenecks than Intel, in part because AMD outsources chip fabrication to Taiwan's TSMC. Still, the semiconductor sector is wrestling with a global shortage of memory chips.
AI processors produced by AMD and Nvidia are paired with expensive high bandwidth memory, and supplies of that memory are constrained as memory manufacturers work to expand capacity. HSBC analysts cautioned ahead of earnings that limited memory availability could restrain growth for the AI industry despite strong demand.
In addition, an increase in memory prices could weigh on end-market demand in the personal computer segment, a meaningful market for AMD. Researchers expect higher PC prices to reduce sales, creating a headwind for companies exposed to the PC cycle.
Context and market reaction
AMD's revenue outlook signals confidence in its data center and AI-related product traction, but the post-announcement share decline underscores investor sensitivity to execution risks and supply-chain dynamics. Memory constraints, in particular, represent a choke point for AI deployments and for consumer PC affordability.
While AMD's outsourcing model to TSMC is viewed as an advantage for meeting demand, the broader ecosystem's memory capacity shortfall remains an unresolved constraint for chipmakers and system builders.