AMD forecasts $4.5 billion of AI chip revenue this year, shares jump 7%

By Arsheeya Bajwa, Max A. Cherney

(Reuters) -Advanced Micro Devices forecast third-quarter revenue above market estimates on Tuesday, banking on demand for its artificial intelligence chips staying strong.

Shares of the Santa Clara, California-based company rose 7% in extended trading.

AMD benefits from large cloud operators buying the company's AI and other chips. Some view the company as an alternative to Nvidia. Both Meta Platforms and Microsoft are customers of AMD's MI300 line of AI chips.

AMD CEO Lisa Su said the company was boosting its 2024 AI chip revenue forecast to $4.5 billion from a previous target of $4 billion during the conference call late Tuesday. The supply of such chips will remain tight through 2025, Su said.

Overall, AMD forecast revenue of $6.7 billion, plus or minus $300 million, for the third quarter compared with analysts' average estimate of $6.61 billion, according to LSEG data.

On an adjusted basis, the company forecast gross margin of about 53.5% for the third quarter, compared with estimates of 53.6%.

In the second quarter, AMD's data center revenue, its biggest segment, jumped 115% to $2.8 billion, just topping estimates of $2.79 billion, according to Visible Alpha.

"We are in the picks and shovels cycle which is more about hardware infrastructure right now," Creative Strategies CEO Ben Bajarin said. "Most enterprises are spending on AI software but only to trial and pilot programs, (and have) not fully deploy them yet."

Total revenue in the quarter rose 9% to $5.8 billion, which came in above estimates of $5.72 billion.

AMD, which is among the largest providers of PC chips, also benefited from a recovery in the personal computer market after its worst slump in years. New computer AI features are reviving consumer demand.

In the second quarter, AMD reported revenue for PC chips of $1.5 billion, compared with estimates of $1.43 billion, according to Visible Alpha.

The company had adjusted second-quarter earnings of 69 cents per share, topping analyst estimates of 68 cents a share.

Adoption of generative AI technology has driven demand for powerful chips capable of handling the specific processing requirements of applications such as OpenAI's ChatGPT.

(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in San Francisco; Editing by Devika Syamnath and Cynthia Osterman)