AMD Boosts 2024 AI Chip Forecast by $500 Million
Advanced Micro Devices (AMD:US) recently raised its 2024 forecast for artificial intelligence (AI) chip sales by $500 million to $4.5 billion, attributing this increase to high demand. AMD also stated that supply constraints will persist through 2025. The announcement led to a 7.5% increase in AMD's share price during extended trading.
AMD's AI chips are primarily purchased by major cloud computing companies such as Meta Platforms (META:US) and Microsoft (MSFT:US), which recently integrated AMD chips into its cloud platform. This also positions AMD as a notable competitor to Nvidia (NVDA:US), which currently dominates the AI chip market.
In the second quarter, AMD's data center revenue surged 115% to $2.8 billion, exceeding the $2.79 billion estimate. AI chip revenue for the quarter exceeded $1 billion for the first time.
Creative Strategies CEO Ben Bajarin noted that the current cycle is focused on hardware infrastructure, likening it to the gold rush era where suppliers often saw greater profits than miners. He pointed out that while AI software spending is growing, many enterprises are still in the trial phase and not yet fully deploying AI technologies.
Despite the rise in AI spending, some big tech firms are still waiting to see immediate returns. Microsoft's shares dropped 6% after its cloud-computing growth fell short of expectations.
Looking ahead, AMD projects third-quarter revenue between $6.4 billion and $7 billion, surpassing the average analyst estimate of $6.61 billion. The company expects a gross margin of approximately 53.5%, close to the forecasted 53.6%.
For the second quarter, AMD reported total revenue of $5.8 billion, beating the $5.72 billion estimate. Revenue from PC chips was $1.5 billion, exceeding the $1.43 billion estimate. AMD's adjusted earnings were $0.69 per share, surpassing the $0.68 expected by analysts.
On the congressional trading front, Congress members Michael McCaul, Ro Khanna, and Marjorie Taylor Greene were seen investing in the American semiconductor giant within the first half of 2024. Meanwhile, Rep. Josh Gottheimer recently reported a sale of the AMD stock on June 18, 2024.
