Shares in Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) are heading for a 6% fall on Wednesday after results for the past quarter were better than hoped but guidance for the start of 2024 was worse.
The semiconductor giant reported fourth-quarter results for 2023 after market close on Tuesday and, on an earnings call later, gave a bullish production for artificial intelligence (AI) chip sales this year, which appeared not to be bullish enough.
AMD bosses predicted upward of $3.5 billion of sales in 2024 from data-center graphics processing units (GPUs), which focus on AI applications, an improvement from the prior guidance of at least $2 billion.
Some analysts said Wall Street was expecting something like $6 billion from these GPUs this year.
For the first quarter of 2024, management's guidance was for group revenue of $5.1-5.7 billion, which even at the top end was shy of average analyst forecasts of $5.73 billion.
Some major business lines, including PC chips, are expected to decline sequentially during the current quarter, while overall data center revenue would be flat as GPU increases are offset by declines in server central processing units (CPUs).
“For 2024, we expect the demand environment to remain mixed,” CEO Lisa Su said on the call, “with strong growth in our Data Center and Client segments, offset by declines in our Embedded and Gaming segments.
“Against this backdrop, we believe we will deliver strong annual revenue growth and expand gross margin.”
Offering an overview, she added that the company believes “AI is a once-in-a-generation transition that will reshape virtually every portion of the computing market, starting in the Data Center and then expanding into PCs and across multiple embedded markets.
“We have built excellent customer traction based on the strength of our multiyear AI hardware and software road maps, and we see clear opportunities to drive our next wave of growth as we deliver leadership AI solutions across our portfolio.”
For data center, AMD sees 2024 as the “start of a multiyear AI adoption cycle” with the market for data center AI accelerators growing to approximately $400 billion in 2027.
For the past quarter, the Santa Clara, California company reported $6.2 billion of revenue, beating estimates of $6.1 billion, while adjusted earnings per share of $0.77 per share were exactly in line with the Street consensus forecast.
The reaction of the shares in afterhours trading likely reflected what analysts at Wedbush said was an earnings call where the focus was "solely on commentary regarding the success of AMD's AI efforts", with market expectations having ratcheted higher in recent months to drive the stock up over 50% since its AI focussed event in December.
AMD shares, which have more than doubled over the past 12 months to a recent all-time high just below $185, were changing hands at $161.28 in pre-market trading on Wednesday.