AMD (AMD, Financial) shares dropped by 10% in premarket trading, despite the company's latest earnings report revealing a solid 18% jump in year-over-year revenue, hitting $6.8 billion, largely on the back of its booming data center segment. Driving that growth is record demand for AMD's EPYC CPUs and Instinct AI accelerators, both catering to the insatiable need for powerful computing across AI and cloud sectors. However, while data center sales surged by 122%, AMD saw noticeable slowdowns in its gaming and embedded segments, with revenues dropping by 69% and 25%, respectively—a hit that stems from shifting market dynamics and inventory adjustments.
Despite this momentum, some on Wall Street are sounding notes of caution for AMD's 2025 outlook. Analysts like Morgan Stanley's Joseph Moore note that the company's guidance for Q4 hints at a potential plateau in AI revenue, where growth may struggle to match the stellar quarter-to-quarter momentum seen in 2024. AMD's upgraded $5 billion AI revenue forecast has left some investors wanting more, particularly with analysts already projecting a higher $8-9 billion for 2025. While AMD is making strides, capturing additional market share will be critical to sustain its trajectory.
For investors eyeing AMD as a long-term play, this guidance miss might just signal an opportunity. Evercore ISI analysts highlight AMD's unique position as the main challenger to NVIDIA in the AI accelerator market, positioning it to capitalize on a booming sector where NVIDIA has long dominated. With promising product updates in Ryzen processors and strategic acquisitions to bolster AI capabilities, AMD remains a contender poised for growth as the high-performance computing market continues its relentless climb.
