AMD forecast eases AI spending fears as data-center sales surge

AMD forecast faster-than-expected 2027 growth as its data-center sales surge and its multibillion-dollar challenge to Nvidia gathers pace, sending its shares up 8 percent in extended trading.

The forecast and market-beating third-quarter results offered a strong counterpoint on Tuesday to mounting fears that the AI boom is losing steam and soothed investor concerns after rival Intel issued a weak outlook last week.

Intel's shares rose 2 percent, Nvidia stock climbed over 1 percent and Broadcom also advanced 1.2 percent.

On a conference call with analysts, AMD CEO Lisa Su said the company expects overall revenue to rise more than 80 percent in 2027. Su's forecast is higher than the 77 percent growth analysts estimate, according to LSEG data.

Su told analysts that 80 percent of sales next year will come from data-center chips that will "drive the majority of our revenue and earnings growth."

"We see demand across the data-center business, across our CPU business, as well as our data-center AI business," Su said. "And when you look at the rate and pace of that growth, we've been planning for it for the last several years."

Data-center revenue jumped 97 percent to a record US$8.55 billion (HK$66.69 billion) in the third quarter, exceeding estimates of US$8.20 billion.

The company expects fourth-quarter revenue of about US$17 billion, plus or minus 3 percent, above analysts' average estimate of US$16.23 billion, according to data compiled by LSEG.

AMD's line of chips is positioned to benefit from the massive AI data-center buildout, portfolio manager at Gabelli Funds Hendi Susanto said.

"The stock's resilience despite broader pressure on AI-related names suggests investors see AMD's results as confirming its technology leadership and its strong position to keep gaining market share," he added.

AMD is benefiting as a shift in AI workloads toward running models in real-world applications drives demand for its graphics processing units and central processors.

"The AMD numbers provide a greatly needed boost both for AI infrastructure and even, to a smaller degree, the PC market," chief analyst at TECHnalysis Research Bob O'Donnell said.

The company's adjusted gross margin is expected to be about 55 percent, in line with estimates of 55.27 percent and down from 56 percent in the third quarter.

RAMPING UP AI ROLLOUTS

AMD has stepped up AI product rollouts, moving beyond standalone chips to compete with Nvidia's rack-scale systems.

The company's flagship Helios rack, combining its MI455X accelerator and new "Venice" server chips, is in production and set for a larger ramp-up in the fourth quarter. The initial systems are being tested at Meta.

AMD's third-quarter revenue rose 45 percent to US$13.38 billion, beating estimates of US$13.09 billion.

Adjusted profit came in at US$2.09 per share, compared with estimates of US$1.95.

The semiconductor industry is also grappling with a global memory shortage, leaving expensive high-bandwidth memory used in AI processors in scarce supply as manufacturers race to increase production.

Third-quarter sales in AMD's client and gaming segment, home to its PC chips and console processors, fell 8 percent to US$3.72 billion, missing estimates of US$3.79 billion.

AMD said it expects PC unit shipments to decline by a double-digit percentage next year, though Su said the company would "outperform the market."

Last week, Intel forecast its chip revenue to decline in the mid-20 percent range for its fourth quarter and the slowdown would last into 2027.

Reuters

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