Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

AMD Sinks Despite Solid Results, AI Commentary: What Lies Ahead?

By Shane NeagleStock MarketsAug 03, 2023 03:13AM ET
www.investing.com/analysis/amd-fails-to-rally-despite-solid-results-ai-commentary-what-lies-ahead-200640611
AMD Sinks Despite Solid Results, AI Commentary: What Lies Ahead?
By Shane Neagle   |  Aug 03, 2023 03:13AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
BABA
-0.21%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MSFT
-0.32%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ORCL
+0.80%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AMZN
+0.23%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NVDA
+0.36%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AMD
-2.94%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • AMD delivered a solid set of results
  • Continued weakness in the Gaming, PC, and Data Center business units prevented a rally
  • However, the company’s Q3 outlook suggests a faster recovery in Q3

Advanced Micro Devices (NASDAQ:AMD) shares were trading modestly higher Wednesday after the chipmaker reported its second-quarter results and offered a forward-looking outlook. While shares gained in the aftermath of the Q2 earnings report release, the stock pared gains amid a broad weakness in the tech sector on Wednesday.

For the second quarter, AMD reported adjusted EPS of $0.58, just ahead of the consensus for earnings per share of $0.57. For the same period last year, AMD reported a profit per share of $1.05. Revenue fell 18% year-over-year to $5.36 billion, but still marginally better than what the consensus was looking for ($5.32 billion).

Outlook Hints PC Market May Be Turning

Looking closer at the Q2 performance, AMD delivered a modest outperformance relative to analyst expectations despite weakness in the Data center and Gaming business segments. For the former, the company generated $1.32 billion in sales, down 11% YoY. AMD blamed “lower 3rd Gen EPYC processor sales as Enterprise demand was soft and Cloud inventory levels were elevated at some customers.”

“We delivered strong results in the second quarter as 4th Gen EPYC and Ryzen 7000 processors ramped significantly,” said AMD Chair and CEO Dr. Lisa Su.

Similarly, the Gaming segment revenue fell 4% to %1.6 billion on lower gaming graphics revenue. Weakness in these two business units was offset by a 16% YoY increase in the Embedded segment. AMD said it witnessed strength in the Industrial, Vision and Healthcare, Automotive, and Test and Emulation markets.

Finally, the company’s Client business unit continues to see its sales plunge. Revenue fell by 54% YoY to below $1 billion as the chipmaker once again faced lower processor shipments. AMD said the PC market was weak in Q2 while also flagging “a significant inventory correction across the PC supply chain.”

Overall, the company said its adjusted gross margin contracted by 400 basis points to 50%, in line with what the analysts were looking for. On the other hand, the adjusted operating margin topped analyst expectations by 50bps after coming in at 20%.

AMD stock initially leaped higher after the company said it expects to generate $5.7 billion in Q3 revenue (up or down $300 million). The midpoint of this revenue outlook range would imply a sequential acceleration of 6.3%, which hints the company believes the Q2 may have marked a bottom in the PC market weakness.

The chipmaker said it expects its Data Center and Client Segment business units to grow double-digit on a quarter-to-quarter basis “driven by increasing demand for our EPYC and Ryzen processors, partially offset by Gaming and Embedded segment declines.”

Citi analysts upgraded AMD stock to Buy from Hold following the Q2 earnings report.

"We thought AMD’s AI products (MI300) would be margin dilutive and investors would eventually care about the expensive valuation on AMD, and we were wrong on both counts," the analysts said in a note.

All Eyes on MI300

AMD is seen as the only real contender to Nvidia (NASDAQ:NVDA). According to a recent research report by the independent third-party company, AMD’s AI chips are about 80% as fast as those from Nvidia. MosaicML, an AI software startup, conducted a test comparing high-end chips from AMD and Nvidia.

The chips in question are AMD MI250 and the Nvidia A100. In the meantime, both companies have a new, better version of their predecessors.

"For most (machine learning) chip companies out there, the software is the Achilles heel of it. Where AMD has done really well is on the software side," Hanlin Tang, chief technology officer of MosaicML, said.

Back in June, AMD unveiled its Instinct MI300 APUs (accelerated processing units) that combine Zen 4 CPU cores with CDNA 3 GPU cores. The MI 300 Series accelerator family includes Instinct MI300X, which is AMD’s best shot at Nvidia when it comes to high-end chips that can fuel GenAI apps.

“The MI300X is based on the next-gen AMD CDNA™ 3 accelerator architecture and supports up to 192 GB of HBM3 memory to provide the compute and memory efficiency needed for large language model training and inference for generative AI workloads,” the company said.

AMD is forced to go all-in on GenAI chips and prevent Nvidia from having a clear shot at complete multi-year dominance in this highly lucrative market. Citi analysts forecast recently that Nvidia could have a 90%+ market share in the AI chips market in the years to come.

“The scenario is reminiscent of Intel (NASDAQ:INTC) vs AMD ten years ago when Intel had better performance and ecosystem and over 90% share,” Citi analysts told clients in a note.

AMD’s CEO Su tried to reassure investors about the company’s progress on this critical front, saying that AI engagements “increased by more than seven times in the quarter as multiple customers initiated or expanded programs supporting future deployments of Instinct accelerators at scale.”

“We made strong progress meeting key hardware and software milestones to address the growing customer pull for our data center AI solutions and are on-track to launch and ramp production of MI300 accelerators in the fourth quarter,” Su said in a press release.

Similarly, the “MI300” term was mentioned 36 times on the earnings call. She said that the company launched 30 new instances in Q2, including clients like Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL), and Alibaba (NYSE:BABA). Su also said that customer interest in MI300A and MI300X GPUs is “very high.”

Along these lines, the Q3 quarterly earnings report is critical for investors as the management should guide for Q4 sales. This is the quarter when it expects to start shopping Instinct MI300 accelerators. There’s also discussion of a potential AI chip export ban by US regulators, which, if any action were taken, would impact AMD’s outlook.

***

Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

AMD Sinks Despite Solid Results, AI Commentary: What Lies Ahead?
 

Related Articles

AMD Sinks Despite Solid Results, AI Commentary: What Lies Ahead?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Aug 03, 2023 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Amd is second fiddle to nvda
Stephen Fa
Stephen Fa Aug 03, 2023 5:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Not on valuation. Fast follower can be very profitable.
Derick Lim
Derick Lim Aug 03, 2023 4:07AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
A result that is 46% worse than last year pre AI hype result is consider a solid result?.....what ahead lies ?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email