AMD Stock Falls 8% in Premarket Trading Despite Beating Earnings Expectations
Investor enthusiasm wanes for the Nvidia challenger despite a 50% jump in revenue driven by strong AI chip sales.
Quick Look
AMD stock dropped 8% in premarket trading on Wednesday despite reporting a 50% rise in Q2 revenue to $11.54 billion, as high investor expectations for AI stocks outweighed the beat.
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Why It Matters
AMD has seen significant stock gains this year driven by surging demand for its AI chips and data center products.
AMD 's stock fell 8% in premarket trading on Wednesday despite posting earnings that beat expectations, as investor enthusiasm for the Nvidia challenger waned.
The market jitters come despite AMD revenue climbing 50% to $11.54 billion in the second quarter, ahead of analyst expectations of $11.28 billion, in a sign of the company's central position in the market for AI chips.
Data center sales drove much of the company's growth, up 107% on an annual basis to $6.7 billion, which the company attributed to central processing unit and graphics processing unit sales.
But while second-quarter earnings came in "slightly ahead" of consensus, they fell below "more optimistic estimates," Deutsche Bank analysts said in a Wednesday note.
AMD has been a big beneficiary of the AI boom, with the stock trading up 132% so far this year. Confidence has been buoyed by the company's GPU and CPU products.
"AI is driving a significant expansion in demand for compute across all of our markets," CEO Lisa Su said in a Tuesday statement. "Our leadership portfolio and growing customer visibility position us exceptionally well to capture this expanding opportunity and deliver substantial revenue and earnings growth in the years ahead."
Earnings failed to impress investors who've consistently been skittish this year of some AI stocks.
In July, AMD raised its expectations for the size of the semiconductor industry, saying it could be worth $2 trillion per year by 2028. The chipmaker sees $1.4 trillion of that coming from AI accelerators, or GPUs, up from a previous estimate of $500 billion by 2028.
"It's simply a case of market expectations being too high," Michael Field, chief equity strategist at Morningstar, told CNBC.
"The stock has trebled in the last 12 months and now trades on a P/E multiple of 170, meaning expectations are commensurately high," he added. "We view the dip as a potential buying opportunity, and investors may take a similar view in the coming weeks."
What to Watch
AI outlook — possibilities, not facts
Investors may take a buying view on the dip in the coming weeks.
Possible · Within weeks
Open Questions
- Will investors continue to buy the dip in coming weeks?
- Can AMD meet higher long-term semiconductor projections?
