Why is AMD stock plummeting today?
Shares of chipmaker AMD recorded sharp declines before the opening of trading today (Wednesday) in a move expected to wipe out more than $61 billion from the company's market value. The current drop highlights the high bar and inflated expectations the company faces as it attempts to challenge Nvidia's dominance in the field of artificial intelligence, while simultaneously competing with Intel, which is trying to regain its technological lead.
Shares of chipmaker AMD recorded sharp declines before the opening of trading today (Wednesday) in a move expected to wipe out more than $61 billion from the company's market value. The current drop highlights the high bar and inflated expectations the company faces as it attempts to challenge Nvidia's dominance in the field of artificial intelligence, while simultaneously competing with Intel, which is trying to regain its technological lead.
The reports were good, but investors wanted more
The company from Santa Clara, California, forecast that its third-quarter revenue would stand at about $13 billion (with a deviation range of $300 million). This figure is higher than the preliminary estimates of analysts, who predicted revenue of $12.52 billion. Despite the positive forecast, investors, who doubled the share price of AMD this year in the expectation that it would become the leading alternative to Nvidia on the AI chip market, hoped for even more impressive data.
Analysts at the investment firm Bernstein noted that investor expectations had risen significantly following Intel's strong reports a few weeks ago, and that the market already holds very optimistic forecasts regarding the company. Analysts at TD Cowen defined AMD's results and forecast as "objectively good," but explained that the stock faced an exceptionally high bar of expectations following recent announcements by its customers and the sharp jump in the share price.
Revenue from data centers doubled
Alongside the decline in the stock, the company's business activity shows significant growth. AMD's revenue from the data center division more than doubled and reached $6.72 billion, a figure that exceeded preliminary expectations. To strengthen its position in the AI infrastructure field, the company signed significant deals last month with the companies Anthropic and Core Scientific, steps intended to support its long-term ambitions in the growing market.
Company CEO Lisa Su expressed great optimism about the future and noted that AMD expects revenue from the data center division to more than double by 2027. In addition, the company expects its overall revenue growth to be higher than the previous target it set, which stood at more than 35%. Now, it remains to be seen whether the market will be convinced by the actual results.
