The Weakening Ground
The stock of Advanced Micro Devices is nose-diving today, triggered by lackluster performance and subdued projections in its first-quarter earnings disclosure. At 2:44 p.m. ET, the stock had plummeted by 7.3%, following an initial 10% drop earlier in the trading session.
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The Quandary of AMD
While AMD managed to meet expectations in the first-quarter earnings report, investors were craving a more bullish outlook in the realm of AI chips. Despite the company’s optimism of selling $4 billion in artificial intelligence chips this year, they still lag behind industry titan, Nvidia.
Revenue inched up a mere 2% to $5.47 billion, with adjusted earnings per share climbing from $0.60 to $0.62 – slightly surpassing estimates by a cent. Notably, the data center and PC/Client segments demonstrated noteworthy growth, whereas sales in gaming and embedded sectors witnessed a stark downturn.
In the second quarter, AMD envisioned revenue hitting $5.7 billion, marking a 4% escalation from the previous quarter and a 6% leap from the same period a year ago. Although this forecast outpaced the consensus estimate of $5.32 billion, it underscored that AMD is still awaiting a significant push from the AI frontier.
Deciphering the Stock Drop
The precipitous fall in AMD stock is not so much a product of fundamental issues in the earnings report but rather an over-hyped surge in AI expectations preceding the disclosure. Despite its stock value more than doubling since the beginning of 2023, AMD has now relinquished most of these gains for the year, aligning with the latest results and forecasts.
While AMD remains poised for a robust showing in the AI surge, as evidenced by the surge in data center revenue, investors may need to temper their expectations as the overall business contends with the aftermath of a prior slump in gaming and embedded activities.
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