(Bloomberg) — Shares of Advanced Micro Devices Inc. fell as much as 9.1% in extended trading after the chipmaker gave a disappointing forecast for artificial intelligence processors, a lucrative market now dominated by Nvidia Corp. is dominated.
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The company forecast that its MI300 series – a family of so-called AI accelerators – will generate about $4 billion in sales this year. Although this represents an increase from the previous forecast of $3.5 billion, some investors were hoping for as much as $8 billion, according to analysts.
AMD is seen as a leading competitor to challenge Nvidia in the market for accelerators that help develop chatbots and other tools by bombarding them with data. But the industry is catching up. One challenge is producing enough chips to meet demand, Chief Executive Lisa Su said in a conference call.
“We are short on supplies,” she said. “There is no question that if we had more supply, we would still have demand in the short term.”
AMD also gave a cautious sales forecast for the current quarter. Sales will be about $5.7 billion during the period, the Santa Clara, California-based company said. This compares to an average analyst estimate of $5.72 billion. Weak demand for chips used in video game hardware has slowed growth.
Shares fell as low as $143.90 in late trading after the results were released. They had closed at $158.38 on Tuesday, up 7.4% on the year.
The AMD report follows a negative forecast from Intel Corp. from last week, which expected demand to remain subdued in the first half of the year. AMD expects growth in the region of 6% for the current quarter, better than its larger rival’s roughly flat forecast.
Although Intel is still larger than AMD in terms of total revenue, the company only expects about $500 million in AI accelerator sales this year. Nvidia remains far ahead of both companies. Its data center business is on track to generate $95.9 billion in revenue in the current fiscal year, doubling from a year ago and more than the combined revenue of Intel and AMD combined.
Su said supply constraints on the MI300 line are expected to ease later this year but will become noticeable in the second quarter.
In the first quarter, AMD reported profit of 62 cents per share (excluding some items) and revenue of $5.47 billion. This performance compares to an estimated profit of 61 cents and sales of $5.45 billion.
AMD’s PC chip division posted revenue of about $1.4 billion, compared to an estimate of $1.29 billion. Data center revenue was $2.3 billion, in line with the average forecast. Gaming computer sales, meanwhile, were $922 million. Analysts had expected sales of $965.5 million.
Like Intel, AMD still generates most of its revenue from microprocessors for personal computers and servers. The once-solid server market has been less reliable lately as data center operators have poured much of their budget into Nvidia chips – the very area where AMD is now making its own play.
Investors betting on AMD’s AI prospects had sparked a rally earlier this year, although the stock had cooled in recent months. The announcement of a next-generation Nvidia chip has weighed on stocks.
AMD also competes with Nvidia in the market for graphics processors that improve images in video games. It is Intel’s biggest competitor in both server and PC processors – as well as in programmable logic chips that can be reconfigured with software after installation. And it supplies Microsoft Corp. and Sony Corp. with the main component of their game consoles.
AMD said its gross margin – the percentage of sales that remains after deducting production costs – will be about 53% in the second quarter, in line with forecasts.
(Updates with additional forecast from first paragraph.)
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