By Arsheeya Bajwa
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 concerns about whether it can effectively challenge Nvidia in the booming AI market.
Excluding the surprise AI chip sales to China, the company’s data-center segment would have missed estimates at a time when longtime rival Nvidia has accustomed investors to blowout forecasts. On a conference call with investors, AMD CEO Lisa Su reiterated that the company expects sales of a new flagship AI server to OpenAI and others to rise rapidly in the second half of this year, saying a global memory-chip crunch will not slow its plans.
“I do not believe that we will be supply-limited in terms of the ramp that we put in place,” Su said.
Still, those sales remain outside the company’s forecast for the current first quarter, meaning that its other chips such as central processing units (CPUs) will have to carry most of its sales growth in the coming months. Shares fell 7% in extended trading.
“The expectations for large blowout quarters for AI-related hardware companies have skewed what the market is looking for,” said Bob O’Donnell, president of TECHnalysis Research.
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.
During the conference call, Su also said AMD is working with customers beyond OpenAI on AMD’s new AI servers.
But analysts remain concerned that AMD’s success remains tied to a handful of customers that rivals such as Nvidia could try to poach. Reuters reported this week that Nvidia made a $20 billion move to hire most of chip startup Groq’s founders after OpenAI held chip supply discussions with the startup.
“Growth appears concentrated in large deployments and specific regions, and China shipments are significant enough to influence a quarter,” said eMarketer analyst Gadjo Sevilla.
AMD said it 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. AMD said about $100 million of those first-quarter sales would come from its MI308 AI chips in China.
The midpoint of the sales forecast represents year-over-year growth of approximately 32% and a sequential decline of approximately 5%, AMD said. And when stripping out China sales that Wall Street did not anticipate, the low end of the forecast range was $9.4 billion, just above analyst estimates.
AMD said it expects adjusted gross margin of 55%, above analyst estimates of 54.19%. Nvidia, by contrast, has told investors it expects adjusted gross margin in the mid-70% range during its fiscal 2027.
AMD 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 $5.38 billion in the quarter, beating estimates of $5.07 billion.
Excluding sales of the MI308, which is a data-center chip, the results would have been $9.88 billion in overall sales, but data-center revenue would have been $4.99 billion, below estimates.
AMD executives said in November that the company received licenses to sell modified versions of its MI300 series of AI chips in China, after the Trump 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.
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.
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, Peter Henderson and Matthew Lewis)
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