AMD under Pressure: Revenue Forecast Disappoints and Competition with Nvidia Intensifies

Shares of Advanced Micro Devices (AMD) suffered a setback following a mixed revenue forecast for the current quarter, as concerns arose that sales in the artificial intelligence sector might grow more slowly than expected. The company anticipates revenue of about $7.5 billion for the fourth quarter, missing the average analyst estimate of $7.55 billion. AMD also fell short of expectations with its projected adjusted gross margin, which reflects the proportion of revenues after deducting production costs. Although AMD has made significant strides in the AI computing chips business in recent years, it lags behind rivals like Nvidia, which generate significantly larger revenues in this market segment. AMD shares fell by about 4% in after-hours trading on Tuesday, despite an overall increase of 13% this year. AMD is particularly ambitious in aiming for $4.5 billion in revenue this year from its MI300 accelerator products, which compete with Nvidia's offerings. Growth challenges result partly from limited resource availability, as AMD - like many of its competitors - outsources production to external partners such as Taiwan Semiconductor Manufacturing. Investors monitor AMD's performance as an indicator of demand for AI hardware. Major investments by companies like Amazon's AWS and Microsoft in this new IT infrastructure have reshaped the industry, though there are concerns that AI services might not yet generate significant profits, which could question the continuity of such investments. In the past quarter, AMD's data center segment revenue rose to $3.5 billion, more than double from the previous year and slightly above estimates. Revenue from PC chips was $1.88 billion, a rise of 29%. At the same time, the segment for custom processors for Microsoft and Sony game consoles experienced weaker sales, as the current console generations approach the end of their lifecycle. Revenue dropped 69% to $462 million, falling short of expectations.