AMD forecasts revenue above estimates on AI chip demand, but shares fall

Advanced Micro Devices (AMD) forecasts its third-quarter revenue to exceed Wall Street estimates, projecting approximately $13 billion, plus or minus $300 million. This optimistic outlook is fueled by robust demand for its chips, driven by significant data center expansions aimed at powering artificial intelligence technologies.

Analysts, however, had estimated revenue at $12.52 billion. Despite the company's strong performance, AMD shares experienced a decline of over 8% in extended trading. This dip may be partly attributed to AMD's reliance on Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker, where limited advanced packaging capacity continues to pose a hurdle.

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The company expects third-quarter revenue of about $13 billion, plus or minus $300 million, while analysts estimate $12.52 billion.

AMD, considered a close rival to chip giant Nvidia in the graphics processing unit market, is seeing major technology companies and governments worldwide increase spending on AI infrastructure. The company has intensified its AI product launches, moving beyond individual chips to offer integrated AI systems that combine processors, networking gear, and related hardware. This strategy aims to provide customers with a comprehensive AI infrastructure solution, enabling AMD to better compete with Nvidia's rack-scale offerings.

In the second quarter, AMD's revenue surged 50% to $11.54 billion, surpassing the estimate of $11.28 billion. Data-center revenue more than doubled to $6.72 billion, also exceeding expectations. Adjusted profit came in at $1.66 per share, ahead of the estimated $1.62. CEO Lisa Su announced at an AI event in July that the company's second-generation Helios AI servers are in full production and will begin shipping in the coming months.

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The forecast suggests that AMD's multi-billion dollar investments to challenge chip giant Nvidia's dominance in the market for AI chips are beginning to pay off, with sales of its data-center processors accelerating sharply.