AMD Earnings Preview: Could AI Chips Revenue Surprise the Market?
$Advanced Micro Devices(AMD)$
Consensus Estimates
•Analysts project AMD's Q1 revenue at $5.45 billion, up slightly from year-ago period.
•Earnings per share (EPS) are expected to be $0.17, compared with $-0.09 a year earlier.
AMD's AI chips revenue in focus
Data center segment has become the company's biggest business unit. The products of this business include EPYC (CPU), INSTINCT MI300X (GPU), INSTINCT MI300A (APU), etc. The market is most concerned about revenue from AI GPU.
Last quarter's earnings call, on Jan. 30, AMD's projection for over $3.5 billion in 2024 revenue from AI graphics-processing units was lower than expected. Wall Street had raised their expectations to around $6 billion. Related upgrades will be the focus of market attention in Q1 earnings.
On December 6, 2023, AMD launched its Instinct MI300 accelerators and processors for data centers, which compete with Nvidia's H100 series devices in high-performance computing and AI applications.
However, $NVIDIA Corp(NVDA)$
Analysts' Take
Mizuho desk-based analyst Jordan Klein thinks few investors are “willing to step up and buy on fears [they would be] catching a falling knife” ahead of earnings. There is apprehension that AMD may provide unclear information on its MI300 AI product or not increase its revenue outlook of at least $3.5 billion for this year. The outlook for MI300 is crucial to supporting the stock and attracting potential buyers, according to Klein.
TD Cowen analyst Matthew Ramsay believes that investors are following the crowd in their approach to AMD. He commented that "the herd mentality of near-term sentiment never ceases to amaze, though sentiment (up or down) has changed a lot more than fundamentals for AMD this quarter." Ramsay thinks that the "supervolatile near-term sentiment on MI300 expectations" is overblown and that AMD will remain a strong alternative to Nvidia. He adds that concerns about minor high-bandwidth memory issues are likely to be resolved sooner than expected, based on checks.
HSBC analyst Frank Lee predicts that Nvidia will not maintain 100% of the market share in AI GPUs. Lee's base case suggests that AMD will have 10% of the market by 2025, potentially resulting in $12.3 billion in AI GPU revenue, while the consensus view is around $9 billion. “Despite market concerns of Nvidia’s dominance via its GB200 platform in [2025], we believe the MI300 is not direct competition to the GB200,” he wrote, referring to Nvidia’s Grace Blackwell processor. “We expect the introduction of the higher ASP MI350/M375/MI40 to be a real direct competitive product to Nvidia’s GB200.”
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