(Bloomberg) — Shares of Advanced Micro Devices Inc. rose after the chipmaker issued an upbeat revenue forecast, underscoring that its new artificial intelligence processors are driving growth.
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Revenue will be about $6.7 billion in the third quarter, the company said Tuesday. Analysts estimate an average of $6.62 billion. Second-quarter results also exceeded expectations, and the company raised its forecast for so-called AI accelerators – chips used to develop artificial intelligence models.
The outlook suggests AMD is making progress in its pursuit of Nvidia Corp., which dominates the accelerator market. Nvidia has taken advantage of growing demand over the past year to send its stock and share prices soaring, becoming the world’s most valuable chipmaker. Now AMD is looking to move forward with its own lineup, called MI300.
Chief Executive Officer Lisa Su said Tuesday that AMD expects to generate more than $4.5 billion in sales from its MI300 products this year. That’s up from a previous target of $4 billion, although analyst estimates are closer to $5 billion. The growth reflects an effort to ramp up production, but inventories remain tight, she said.
Su downplays concerns that the race to add AI infrastructure is slowing, saying customers are still eager to take advantage of this opportunity.
“The general view of AI investments is: we need to invest – the potential of AI is so great,” she said during a conference call with analysts. “The investment cycle will remain strong.”
MI300’s revenue reached $1 billion in the second quarter, and the company pledged to roll out new AI processors once a year – a major milestone.
“We have continued to accelerate our AI traction,” Su said. Cloud computing and enterprise customers are embracing AMD’s Instinct MI300X products, she said. And demand for traditional personal computing and server businesses is increasing.
AMD’s second-quarter revenue rose 8.9% to $5.84 billion, better than an estimate of $5.72 billion. Earnings rose to 69 cents per share, compared with a projection of 68 cents.
AMD is Nvidia’s biggest rival in the accelerator market, but it still lags behind by a wide margin. The hope is to raise more money that data center operators such as Microsoft Corp. and Meta Platforms Inc. invest in the creation of AI tools.
While demand for accelerators has been strong, interest in some other AMD products has waned. Embedded chips and semiconductors for gaming consoles have been struggling lately.
AMD shares rose more than 7% in extended trading after the announcement. They previously closed at $138.44 in New York, putting them down 6.1% this year.
AMD’s quarterly report kicks off a week of earnings updates from major semiconductor manufacturers. Qualcomm Inc., Arm Holdings Plc and Intel Corp. are all reporting numbers this week, and it comes at a vulnerable time for the chip industry. Investors have been selling shares of the companies after a dramatic run-up earlier this year.
The Philadelphia Stock Exchange Semiconductor Index, a closely watched benchmark, is down 11% this month. Among investors, excitement about AI spending has given way to concern that the infrastructure may not deliver quick results.
Like Intel, AMD still gets most of its revenue from PC and server microprocessors. Santa Clara, California-based AMD also competes with Nvidia in the market for graphics processors that improve visuals in video games.
The company is Intel’s biggest rival in both server and PC processors, as well as in programmable logic chips, which can be reconfigured with software after installation. And it supplies Microsoft and Sony Group Corp. the main component of their gaming consoles.
AMD’s data center unit had revenue of $2.8 billion last quarter, more than double the level a year earlier. Analysts had estimated $2.75 billion. PC chips grossed $1.5 billion, up 49%.
Gaming, meanwhile, fell 59% to $648 million. The two major gaming consoles that use AMD chips are now in their fifth year, AMD said. Embedded semiconductor revenue fell 41% from last year to $861 million, due to weak demand from customers building up stockpiles of parts.
(Updates with additional comments from the CEO, beginning in the fifth paragraph.)
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