AMD shares dive 8% as AI chip revenue disappoints investors, wiping out US$15B in market value

USA: Shares of Advanced Micro Devices (AMD) fell by 8 per cent on Wednesday (Feb 5), a sharp drop that wiped out US$15 billion (S$20.25 billion) in market value. The decline came after the company revealed that its AI chip revenue for the fourth quarter, which grew by 69 per cent to US$3.9 billion (S$5.27 billion), missed analysts’ expectations of US$4.15 billion (S$5.60 billion), Reuters reported. 

Ben Barringer, a technology analyst at Quilter Cheviot, said that while AMD is making progress in gaining market share from Intel in the central processing unit (CPU) market, it is still far behind Nvidia in graphics processing units (GPUs). He noted that investors have been hoping AMD will challenge Nvidia’s dominance, but at the moment, the company “is very much struggling to break the moat and disrupt its market position”.

After AMD’s share price more than doubled in 2023 on bets that its AI-optimized GPUs would challenge Nvidia, the company’s stock fell 18 per cent in 2024. Meanwhile, Nvidia’s stock surged by 171 per cent.

Tech giants like Microsoft and Meta, both AMD customers, are also pushing to create their own cheaper, more efficient in-house chips, which could reduce demand for AMD’s off-the-shelf processors.

Bank of America (BofA) analysts noted that as Nvidia continues to outperform and custom chips gain popularity with hyperscalers, AMD might struggle to lead the AI market despite its strong growth.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, pointed out that the launch of a low-cost AI model by the Chinese firm DeepSeek has made investors more cautious about spending heavily on AI chips.

She added that AMD’s results and outlook have further knocked investor confidence further.

Following the results, 22 analysts lowered their price targets for AMD’s stock, with the median target now set at US$150 (S$202.55), down from US$166.5 (S$224.83) before the announcement. /TISG

Read also: AMD to cut about 1,000 jobs in effort to focus on AI market

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