AMD forecasts revenue above estimates on AI chip demand, but shares fall

AMD forecasted quarterly revenue above Wall Street estimates, driven by strong demand for its chips in data-center expansions for AI technologies, but its shares fell over 8% in extended trading.

AMD forecast quarterly revenue above Wall ​Street estimates on Tuesday, banking on ​strong demand for its chips from massive ‌data-center ​capacity expansions to power AI technologies.

Shares of the Santa Clara, California-based company, however, fell over 8% in extended trading. The company is regarded as chip ‌giant Nvidia's closest rival in the market for graphics processing units, as major technology companies and governments worldwide ramp up spending on AI infrastructure.

AMD has stepped up its AI product launches and moved beyond selling individual chips ‌to offering AI systems that combine processors, networking gear and related hardware, giving customers an integrated AI ‌infrastructure option and allowing it to better rival Nvidia's rack-scale offerings. The company expects third-quarter revenue of about $13 billion, plus or minus $300 million, while analysts estimate $12.52 billion, according to data compiled by LSEG.

Adjusted gross margin is expected to be about 56%, ⁠largely in ​line with the estimate. While ⁠GPUs dominate heavy AI training, AMD is also benefiting from growing demand for central processing units, which are used alongside pricey ⁠graphics processors in servers. This has helped AMD capture market share from Intel.

Supply, however, is constrained by AMD's reliance ​on TSMC , the world's largest contract chipmaker, where tight advanced packaging capacity continues to be ⁠a key hurdle. The forecast suggests that AMD's multi-billion dollar investments to challenge chip giant Nvidia's dominance in the market for AI chips ⁠are ​beginning to pay off, with sales of its data-center processors accelerating sharply.

Second-quarter revenue rose 50% to $11.54 billion, beating the estimate of $11.28 billion. Data-center revenue more than doubled to $6.72 billion, also exceeding expectations of $6.48 billion. Adjusted ⁠profit came in at $1.66 per share, ahead of the estimated $1.62. At AMD's AI event in July, CEO Lisa ⁠Su said the ⁠company's second-generation Helios AI servers, featuring the MI455X AI accelerator and "Venice" processor made by TSMC, are in full production and would begin shipping in the coming months.