AMD Shares Decline Following Revenue Forecast

(Reuters) – Advanced Micro Devices (NASDAQ: AMD) shares fell 8% on Wednesday after the chip company's revenue forecast failed to impress investors looking for a bigger windfall from the AI boom.

AMD could lose around $20 billion in market value, based on premarket movements. The company has been one of the biggest winners of the chip demand boom sparked by the rise of generative AI, with its shares up nearly 156% since end-2022.

However, its soft quarterly revenue forecast and a $5 billion AI chip sales target for 2025 showed that demand for the processors was rising faster than their production. CEO Lisa Su noted that chip supplies will be tight going into next year.

> "It is probably unpalatable for an 'AI name' to even guide inline, let alone below," said Bernstein analyst Stacy Rasgon.

Rasgon added, "At this point, AI performance, while not bad in the objective sense, appears unlikely to drive upside to current expectations, and talk of 2025 'lumpiness' in the business will probably increase risk (or at least raise some eyebrows)."

Other chip firms like Arm and Qualcomm (NASDAQ: QCOM) also saw declines of more than 2%. In contrast, AI chip leader Nvidia (NASDAQ: NVDA) was down only 0.3%, suggesting that investors did not expect similar supply shortage impacts.

Both Nvidia and AMD rely on chip-making giant TSMC for manufacturing advanced AI chips, but analysts remain relatively unconcerned about Nvidia's supply.

> "AI still dominates this (AMD) story, and while the company raised sales expectations every quarter this year, the concern is that AMD won’t be able to meet Street estimates that are already around $8 billion-$9 billion for calendar 2025," Jefferies analysts remarked.

At least 10 analysts lowered their target price on AMD stock, while 8 raised their views, adjusting the median target to $187.50, which represents nearly 13% upside from the company's last closing price.

AMD currently trades at nearly 32 times its 12-month forward earnings estimates, compared to 36 times for Nvidia.