The chip company AMD has great hope for a newly developed chip for products based on artificial intelligence (AI).
The US company plans to generate sales of two billion US dollars (almost 1.9 billion euros) with the processor next year, as CEO Lisa Su explained on Tuesday (local time) in a conference call on the previously published quarterly figures. Delivery is scheduled to begin in the coming weeks. According to AMD, it has already received significant pre-orders, particularly from customers in the cloud computing sector.
In the current quarter, the new AI chip is expected to generate sales of $400 million. According to AMD, the processor will be the fastest product in the company’s history to reach the $1 billion sales threshold. The market is “tremendous,” said CEO Su. She estimates that the market for AI could grow to more than $150 billion by 2027.
AMD thus fueled hopes that demand for the AI chip could offset the significant decline in orders for semiconductors from the video game segment. AMD had previously given a rather weak sales forecast for the financial market for the fourth quarter. Intel’s competitor expects revenues of between $5.8 billion and $6.4 billion. In addition to the declining demand for gaming, chips for industry, the automotive sector and network systems also continue to develop weaker.
Analysts had previously expected sales of $6.4 billion on average.
In the third quarter, AMD increased revenues by a good four percent year-on-year to $5.8 billion. Profit jumped to $299 million from $66 million a year ago. AMD also benefited from a recovery in the traditional PC technology business. In the past, this had suffered from high levels of overcapacity in the industry.
AMD shares on the rise – NVIDIA shares also recovered
After the recent bad news from the chip sector, the processor manufacturer AMD revived the imagination for artificial intelligence (AI) on Wednesday. Investors put up with a weak quarterly outlook; instead, AMD’s price on the NASDAQ stock exchange recently rose by 7.76 percent to $106.14. The Intel competitor has great hope for newly developed chips under the name MI300 for AI-based products.
Against this backdrop, other industry stocks also rose again on Wednesday. For months, NVIDIA shares in particular have been symbolic of AI fantasy, having reached their lowest level since June the day before after their fantastic run this year. The NVIDIA price has now recovered by around three percent. The PHLX Semiconductor Index, which tracks the entire sector, gained 1.2 percent on Wednesday. It had recently reached its lowest level since the end of May.
At the beginning of the week, ON Semiconductor caused bad news with a weak outlook for the fourth quarter. Analyst Stacy Rasgon from Bernstein Research also highlighted a weak forecast for the final quarter at AMD. However, he emphasized that management had “kept the dream of artificial intelligence alive” in the conference call.
His colleagues Timothy Arcuri from UBS and Ingo Wermann from DZ Bank emphasized that they see great potential in the AI business. Arcuri referred to an introductory event planned for December. According to his theory, the breadth of the possible customer base and intensive partnerships with Microsoft, Meta and Google will be highlighted there. For him, AMD remains a “top idea” for investors despite lowered estimates.
According to Wermann, the decline in sales of gaming chips in the third quarter prevented even better sales and profit development. However, the expert gave higher weight to the strong recovery in the PC processor business, in which Intel had gained market share. In addition to the AI applications, he also praised the development of solutions for data centers.
AMD shares still remain among the best values in the Nasdaq 100 index in 2023, which rose by almost one percent on Wednesday before the US interest rate decision. Despite recent price losses, shares have gained almost two-thirds so far this year. However, a comparison with the AI investor favorite NVIDIA still suggests potential if the MI300 chips take off. Because NVIDIA shares have still almost tripled this year after their setback.
Goldman lowers target for AMD to $125 – ‘Buy’
The US investment bank Goldman Sachs has reduced the price target for AMD from 137 to 125 US dollars, but left the rating at “Buy”. The chip manufacturer’s outlook for the fourth quarter falls slightly short of expectations, wrote analyst Toshiya Hari in a study available on Wednesday. However, market share gains in the server business and the dynamics in the data center segment speak in favor of the share.
SANTA CLARA/NEW YORK (dpa-AFX / dpa-AFX Broker)
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