Advanced Micro Devices (AMD) is anticipating a strong fourth quarter as it prepares to launch artificial intelligence (AI) chips that could rival those produced by Nvidia. The company’s CEO, Lisa Su, believes there is a significant opportunity to sell these AI chips in China. AMD’s stock rose approximately 3.5% in after-hours trading following this announcement.
AMD plans to increase production of its MI300 AI accelerator chips in the fourth quarter. These chips are designed to compete with Nvidia’s advanced H100 chips, although they are currently in short supply. Su stated that there is strong interest from customers in the MI300 series chips, and the company has expanded its partnerships with cloud providers, large enterprises, and leading AI companies.
Investors are hopeful that AMD could eventually pose a challenge to Nvidia in the rapidly growing AI chip market when it releases a competing product later this year. However, AMD’s flagship chips currently exceed the performance restrictions for sale to China under US export control regulations. Unlike Nvidia and Intel, AMD has yet to develop special chips tailored for the Chinese market. Nevertheless, Su expressed confidence in the sales potential for AMD’s AI chips in China and emphasized the company’s commitment to compliance with US export controls.
While AMD has not provided a detailed full-year forecast, it expects sales in its data center business, including MI300 sales, to exceed the $6.04 billion total achieved in 2022. Jenny Hardy, portfolio manager at GP Bullhound, a firm that owns Nvidia and AMD stock, highlighted that Nvidia still faces supply constraints, creating an opportunity for AMD’s chips. If AMD can successfully ramp up production and launch the MI300 chips in the fourth quarter, there is likely to be strong demand due to the limited availability of Nvidia chips.
During a conference call with investors, Su also mentioned the demand for AMD’s MI250 chip, which is an older offering suitable for less complex AI tasks. In the second quarter, AMD’s data center business revenue declined 11% to $1.32 billion, while revenue from its client business dropped 54% to $998 million compared to $2.2 billion the previous year.
Analysts predict increased spending on data centers by major cloud players like Microsoft and Google in the second half of the year. This spending is expected to be focused on AI chips and infrastructure. Additionally, there are signs of improvement in the PC market, with a moderation in the decline of shipments and growing demand.
AMD’s finance chief, Jean Hu, forecasted revenue of approximately $5.7 billion, plus or minus $300 million, for the current quarter. This estimate slightly falls short of analyst expectations of $5.82 billion in revenue.
In summary, AMD is looking forward to a strong fourth quarter driven by the launch of its AI chips, which could rival those produced by Nvidia. The company sees significant potential in selling its AI chips in the Chinese market, although it acknowledges the need to comply with US export controls. Investors are optimistic about AMD’s prospects, especially considering the supply constraints faced by Nvidia. Additionally, there is growing demand for AMD’s MI250 chip, and the company anticipates growth in its data center and client segment revenues. Increased spending on data centers by major cloud players and signs of improvement in the PC market further contribute to the positive outlook for AMD.
