Chip Stocks Tumbled Due to AMD's Weaker-Than-Expected Earnings Prospect

After the US market closed on Tuesday, AMD plunged more than 7% because its estimated earnings could not satisfy market expectations, disappointing the market.

 

 

According to FactSet, AMD reported earnings of $0.92 per share for the third quarter in 2024, meeting analysts expectations, and a revenue of $6.8 billion, rising 17% from $5.8 billion a year ago and surpassing the expected $6.7 billion. AMD expected its fourth-quarter revenue to be about $7.5 billion (plus or minus $300 million), slightly less than analysts' average estimate of $7.55 billion. AMD forecast gross margins of about 54%, in line with analysts' expectations. Its forecast of AI chip sales in 2025 was expected to rise from $4.5 billion to $5 billion. For such an outlook, Summit Insights' analyst Kinngai Chan commented that AMD's Q4 outlook was not good enough for investors.

 

 

Meanwhile, U.S. chip stocks were dragged down by AMD's plunge after the market close. For the industrial decline, Michael Schulman, chief investment officer at Running Point Capital, said that Most investors, once they accepted AMD's good results and its slightly gloomy forecasts, would try to infer what this meant for the rest of the AI chip and semiconductor market.

 

AMD's revenue growth was mainly driven by its soaring data center business revenue including AI chips. Due to its increased AI chip sales, many analysts have positioned it as a competitor to NVIDIA.

 

However, judging from recent performance, AMD does not seem to show enough competitiveness. Analysts generally agreed that NVIDIA would maintain its large market share and leading role in the market in the future partially because of its entire AI ecosystem including CUDA software and networking equipment. Before the release of earnings, Bernstein analysts said that the recently released next-generation products did not seem to significantly shorten the gap with NVIDIA.

 

#amd #nvidia