AMD Stocks Drop as AI Chip Revenue Falls Short of Investor Expectations

05.02.2025

 

Shares of Advanced Micro Devices (AMD) dropped 9% in premarket trading after the company reported disappointing AI chip revenue, falling short of investor expectations. Despite posting quarterly results and revenue projections that surpassed analyst estimates, the company’s AI-related revenue missed the mark, overshadowing its overall performance. Investors, closely comparing AMD’s results to those of Nvidia—dominant in the GPU market—expressed concern over AMD’s ability to compete.

For the fourth quarter, AMD reported data center revenue of $3.9 billion, below the consensus estimate of $4.15 billion, which serves as a proxy for its AI business. While AMD continues to gain market share in CPUs from Intel, it struggles to catch up to Nvidia in the highly competitive GPU market, a crucial area for AI-related technologies.

The company’s challenges come amid increasing competition, not only from Nvidia but also from other tech giants like Microsoft and Meta, who are developing their own specialized chips for generative AI applications. The rise of Chinese AI company DeepSeek has further intensified the pressure on AMD to make significant strides in this space.

As a result of the weaker-than-expected performance, AMD could lose approximately $17.5 billion in market capitalization. At $108.78 in premarket trading, analysts have cut their price targets for the stock, reducing the median target to $155 from $166.5 prior to the earnings report. In contrast, Nvidia’s stock surged by 171% in 2024, while AMD saw an 18% decline over the same period.

The tech sector’s growing interest in custom silicon solutions for AI workloads has compounded AMD’s challenges. As the market shifts, investor confidence has been rattled, and analysts are questioning whether AMD can disrupt Nvidia’s dominant position in the GPU market.

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