AMD Earnings: 7x Increase in AI Engagements, MI300A and MI300X GPU on Track

AMD beat Wall Street’s targets for the second quarter On Tuesday, Advanced Micro Devices (AMD.O) predicted a solid year-end, fueled by the anticipated release of artificial intelligence chips that might rival Nvidia (NVDA.O) semiconductors.

About 3% of AMD’s shares increased in after-hours trading.

According to CEO Lisa Su, AMD will increase manufacturing of its premier MI300 artificial intelligence chips in the fourth quarter. The sophisticated H100 processors that Nvidia already sells are expected to face competition from the scarce accelerator chips.
Su claimed that “very high” client interest in the MI300 series processors and an increase in AMD’s third-quarter collaborations with “top-tier cloud providers, large enterprises, and numerous leading AI companies” were also noteworthy developments.

In the booming market for cutting-edge AI processors, investors are expecting that the MI300 chips, scheduled for release later this year, will compete with Nvidia.
It has not yet developed specialized chips for the lucrative Chinese market, unlike Nvidia and Intel (INTC.O), and MI300s surpass the performance thresholds for sale to China under export limitations announced in October.
To adhere to U.S. Commerce Department regulations on the export of cutting-edge AI semiconductors to China, Nvidia updated its H100 chips. Su stated during a conference call with analysts on Tuesday that it is considering a similar approach with its MI300 and older MI250 chips.

“Our plan is to, of course, be fully compliant with U.S. export controls. But we do believe there’s an opportunity to develop product(s) for our customer set in China that is looking for AI solutions, and we’ll continue to work in that direction.”

Although it has not provided a precise full-year projection, it has stated that it anticipates 2023 data center business sales, including those of MI300 chips, to surpass $6.04 billion in 2022.
Nvidia still has supply issues, according to Jenny Hardy, portfolio manager at GP Bullhound, which owns Nvidia and stock, which makes room for AMD’s processor.

Hardy’s said

“If AMD can ramp production and launch those MI300 chips in the fourth quarter, they will likely see strong demand because plenty of people cannot get their hands on Nvidia chips. So we would assume that AMD can effectively kind of fill some of that supply-demand gap,”

According to Su, AMD has plenty of MI300 chip components for both a “aggressive” fourth-quarter launch and supplies through 2024.
Su mentioned the “strong interest” in its outdated MI250 processor, which is still a “very good option” for simpler AI applications.
Revenue from AMD’s client business dropped 54% to $998 million from $2.2 billion a year earlier, while revenue from its data center division dropped 11% to $1.32 billion.

On sales of $5.36 billion in the June quarter, the company, situated in Santa Clara, California, generated adjusted earnings of 58 cents per share. FactSet’s poll of analysts predicted $5.32 billion in revenue and earnings of 57 cents per share. However, AMD’s earnings fell by 45% year over year, while its sales plummeted by 18%.
According to a news release from the CEO, Lisa Su, “we delivered strong results in the second quarter as 4th Gen Epyc and Ryzen 7000 processors ramped significantly.”

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Today’s stock market after-hours trade saw AMD stock rise 3.7% to 121.99. AMD stock increased 2.8% during Tuesday’s regular trading session to close at 117.60.
IBD MarketSmith charts show that AMD stock is in a consolidation pattern with a buy point of 132.83.
AMD predicted revenue of $5.7 billion for the current quarter compared to analyst projections of $5.82 billion. AMD reported sales of $5.57 billion during the same period last year.

According to Chief Financial Officer Jean Hu’s statement in the press release, “looking to the third quarter, we expect our data center and client segment revenues to each grow by a double-digit percentage sequentially driven by increasing demand for our Epyc and Ryzen processors, partially offset by gaming and embedded segment declines.”
On a year-over-year basis, AMD has posted decreased earnings for four straight quarters. Sales have decreased for two consecutive quarters as the company deals with a decline in the market for traditional servers and personal PCs.

According to IBD Stock Checkup, Advanced Micro Devices is ranked eighth out of 36 stocks in the fabless semiconductor business category. The IBD Composite Rating for AMD stock is 91 out of 99.
IBD’s Composite Rating combines important technical and fundamental data to provide investors a better understanding of a stock’s strengths. The Composite Rating of the top growth stocks is 90 or above.

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