Title: AMD Beats Expectations for Q3, Stock Soars on High AI Chip Sales Forecast
Introduction:
Advanced Micro Devices (AMD), the chipmaker based in Santa Clara, California, announced its third-quarter earnings, surpassing Wall Street’s estimates. While the company missed its outlook for the current period, it forecasted strong sales of its new artificial intelligence (AI) chips for data centers. This positive news about the future buoyed AMD stock, leading to a surge in trading.
Q3 Performance:
AMD reported adjusted earnings of 70 cents per share on sales of $5.8 billion for the September quarter. This exceeded analysts’ expectations of 68 cents per share on sales of $5.7 billion. Year-over-year, both sales and earnings increased by 4%. This marked a positive turnaround for AMD, which had experienced four consecutive quarters of declining earnings.
Q4 Outlook:
Although AMD expects sales of $6.1 billion in the fourth quarter, a 9% increase from the same period last year, this fell short of analysts’ expectations of $6.39 billion. However, the company offset this soft outlook by forecasting robust sales for its MI300 AI accelerators. AMD predicts sales of more than $2 billion for the new product in 2024, with $400 million anticipated in Q4 as production ramps up.
Analysts’ Reactions:
The sales forecast for the MI300 AI accelerators drew attention from analysts, with Susquehanna Financial Group analyst Christopher Rolland highlighting how it exceeded market expectations. His price target for AMD stock is $130. Other analysts also praised AMD’s AI chip sales forecast, positioning the company as a strong alternative to market leader Nvidia. However, due to the missed Q4 outlook, at least 15 analysts revised their price targets on AMD stock.
AMD Stock Performance:
Following the news, AMD stock experienced a significant jump, rising 5.9% to $104.33 in morning trades on the stock market. The positive reaction reflected investor confidence in the company’s earnings beat and strong AI chip sales forecast.
CEO and CFO Statements:
AMD Chief Executive Lisa Su credited the sales of Ryzen 7000 series PC processors and record server processor sales for the strong Q3 performance. She also highlighted the rapid growth of their data center business, driven by the strength of the Epyc CPU portfolio and the forthcoming Instinct MI300 accelerator shipments.
Chief Financial Officer Jean Hu acknowledged anticipated sales growth in the data center and client segments. However, she also noted potential softening demand in the gaming and embedded markets.
Comparison to Rival Intel:
AMD’s strong performance stands in contrast to its rival Intel, which recently delivered a beat-and-raise third-quarter report due to the improving PC market. Intel ranks seventh out of 32 stocks in IBD’s semiconductor manufacturing industry group, while AMD sits at fourth out of 37 stocks in IBD’s fabless semiconductor industry group.
Conclusion:
Despite missing Q4 sales expectations, AMD’s stronger-than-expected Q3 results and positive AI chip sales forecast have fueled investor confidence. As the company positions itself as a strong competitor to Nvidia and demonstrates growth in its data center business, AMD remains an attractive player in the semiconductor industry.
Disclaimer: This article is for informational purposes only and should not be taken as financial advice. A thorough analysis and consultation with a financial professional is recommended before making any investment decisions.