AMD's Lisa Su addresses guidance concerns, says demand still accelerating for advanced chips

NEW YORK – Advanced Micro Devices CEO Dr. Lisa Su mounted a vigorous defense of the company's growth trajectory on Wednesday, asserting that underlying demand for its most advanced artificial intelligence chips is accelerating at an unprecedented pace, even as a tepid financial forecast sent the company's stock tumbling.

In a direct address to investors following a sharp 13% drop in AMD's share price, Su painted a picture of a company rapidly scaling to meet a surge in AI-driven demand that has intensified over the past quarter. The market's starkly negative reaction, however, underscores the immense pressure on AMD to deliver flawless execution as it challenges Nvidia's dominance in the booming AI sector.

Market Reacts Sharply to Tepid Forecast

The catalyst for Wednesday's sell-off was not the company's past performance but its future outlook. While AMD's fourth-quarter results, released Tuesday evening, surpassed Wall Street's revenue and profit expectations, they were thoroughly overshadowed by a first-quarter revenue projection that fell significantly short of analyst consensus.

This disconnect between a strong Q4 and a seemingly weak Q1 created a narrative of decelerating growth that spooked investors, who have priced AMD for perfection in the high-stakes AI race.

By the Numbers: A Look at the Disconnect

To understand the market's reaction, it's crucial to examine the figures that drove the narrative.

• Q4 Performance: AMD reported fourth-quarter revenue of $6.17 billion, slightly ahead of the $6.12 billion analysts had projected. Adjusted earnings per share came in at $0.77, matching expectations.
• Q1 Guidance: The company forecast first-quarter revenue of approximately $5.4 billion, plus or minus $300 million. This was well below the average Wall Street estimate of $5.73 billion.
• Segment Weakness: The weaker-than-expected forecast was attributed primarily to softness in its gaming and embedded chip segments, which are facing seasonal declines and inventory corrections. This weakness is currently masking the strength in the company's datacenter division.

Su's Defense: A Story of Accelerating Demand

Speaking to CNBC, Su countered the market's interpretation, framing the guidance as a temporary blip overshadowed by a larger, more significant trend in the datacenter.

"What I would tell you from someone on the inside is AI is accelerating at a pace that I would not have imagined," Su stated, emphasizing that the demand for computational power continues to vastly outstrip the available supply.

Her defense centered on several key points highlighting the momentum within AMD's most critical business unit.

• Datacenter Momentum: Su confirmed that AMD's datacenter business, the epicenter of its AI strategy, accelerated from the fourth quarter into the first. This directly contradicts the idea of a broad-based slowdown.
• CPU Strength: Demand for the company's EPYC central processing units (CPUs) is "going gangbusters," according to Su. These chips are essential for the enterprise AI workloads that businesses are rapidly deploying.
• MI300 AI Accelerator Ramp: The core of AMD's AI narrative is the new Instinct MI300 accelerator, a powerful GPU designed to compete directly with Nvidia's flagship H100. Su noted a "step up in demand" over the last 60 to 90 days for this product.
• Upgraded AI Chip Forecast: In a significant show of confidence, AMD raised its 2024 sales forecast for its AI chips from $2 billion to $3.5 billion during its earnings call. Su hinted this figure could still be conservative, suggesting further upside as the year progresses.

Navigating the Competitive AI Landscape

AMD's current position must be viewed through the lens of the broader semiconductor market, which is being reshaped by the generative AI revolution.

The Nvidia Factor

Nvidia currently holds an estimated 80% or more of the market for AI data center GPUs, a dominant position that has made it one of the world's most valuable companies. Its H100 and A100 chips have become the industry standard, creating a massive competitive moat. AMD's MI300 is widely seen as the most credible and powerful alternative for companies seeking to diversify their supply chain and secure high-performance compute.

A Tale of Two Segments

The challenge for AMD is that its overall financial results are a composite of multiple, distinct businesses.

• Datacenter (AI & Cloud): This segment is experiencing explosive growth and is the primary focus of investors. The success of the MI300 and continued strength in EPYC CPUs are paramount.
• Client, Gaming, and Embedded: These more traditional segments (powering PCs, consoles like the PlayStation 5 and Xbox, and various industrial devices) are subject to different, often cyclical, market forces. Current weakness in these areas is dragging down the company's consolidated revenue forecast, creating the perception of a slowdown that isn't reflective of the core AI growth story.

The Road Ahead: A 'Prove It' Moment for AMD

The divergence between Lisa Su's bullish commentary and the company's conservative guidance places AMD in a "prove it" position for 2024. The company's stock performance for the remainder of the year will likely hinge on its ability to deliver on, and ideally exceed, its promises.

Investors and analysts will be watching several key indicators:

• MI300 Execution: The single most important factor is the production and sales ramp of the MI300. The market needs to see clear evidence that AMD can meet its $3.5 billion target and capture meaningful market share from Nvidia.
• Future Guidance Revisions: Wall Street will be looking for AMD to raise its full-year guidance in subsequent quarters as visibility into MI300 demand improves and other segments potentially stabilize.
• Customer Adoption: Announcements of major cloud providers and enterprise customers deploying the MI300 at scale will be critical validation points for AMD's competitive position.

For now, the narrative is split. The market has priced in the risk of a stumble, while AMD's leadership insists the most significant growth wave is just beginning to build. The coming quarters will determine whether the cautious forecast was a prudent hedge or a missed signal of a truly historic acceleration.