Feb 3 (Reuters) – Advanced Micro Devices on Tuesday forecast a slight decline in first-quarter revenue despite an unexpected boost from sales of its AI chips to China, raising doubt about whether it has the supply-chain clout to challenge Nvidia in the booming AI market.
AMD said its forecast for the current quarter also includes approximately $100 million in sales of its MI308 AI chips to China, after the company had excluded it from sales forecasts for the fourth quarter in November.
Shares fell more than 5% in extended trading, after investors tried to dissect how the company performed without the sales to China.
AMD executives had said in November that the company received licenses to sell modified versions of its MI300 series of AI chips in China, after U.S. President Donald Trump’s administration placed further restrictions on exports of advanced chips to Beijing. The MI308 chip competes with Nvidia’s H20 chip, both of which were legal to sell in China at the start of last year.
The company expects revenue of about $9.8 billion for the first quarter, plus or minus $300 million, compared with analysts’ average estimate of $9.39 billion, according to data compiled by LSEG.
This would represent year-over-year growth of approximately 32% and a sequential decline of approximately 5%, AMD said.
Tuesday’s after-hours share fall could be attributed to AMD’s expectations of a sequential sales drop, Creative Strategies Chief Executive Ben Bajarin said.
Santa Clara, California-based AMD is seen as the closest contender to challenge the AI chip dominance of the world’s most valuable firm, Nvidia, as Big Tech and governments across the globe double down on investing in AI hardware.
AMD is also one of the leading providers of data-center central processing units, which are used alongside pricey graphics processors in servers.
The rapid expansion of data center capacity has boosted server CPU demand, benefiting AMD, which has been steadily eating away at rival Intel’s share of the market.
While Intel has been unable to fully address demand for server CPUs due to supply constraints for its in-house production, analysts expected AMD to face fewer such issues since it outsources the manufacturing of its chips to Taiwan’s TSMC.
The semiconductor industry is also grappling with a global supply shortage of memory chips.
AI processors made by AMD and Nvidia are accompanied by expensive high bandwidth memory (HBM), whose supply is tight as memory providers work to expand capacity.
Memory supply constraints could hamper growth for the AI industry despite strong demand, HSBC analysts said ahead of earnings.
An uptick in memory prices is also likely to hit end-market demand in the personal computer industry, a key segment for AMD, with researchers expecting higher PC prices to hurt sales.
The company reported fourth-quarter sales of $10.27 billion, compared with estimates of $9.67 billion.
Revenue in its key data-center segment grew 39% to $5.4 billion in the quarter, beating estimates of $5.07 billion.
AMD has accelerated its AI product launches and is moving into selling full AI systems from just chips to better compete against Nvidia, which now provides “rack-scale” systems that combine GPUs, CPUs and networking gear.
AMD also entered into a multi-year deal with OpenAI last year to supply AI chips to the company, which would bring in tens of billions of dollars in annual revenue and give the startup the option to buy up to roughly 10% of the chipmaker.
(Reporting by Arsheeya Bajwa in Bengaluru and Stephen Nellis in San Francisco; Editing by Tasim Zahid and Matthew Lewis)
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