AMD's Lisa Su: AI Chip Sales to Reach $2 Billion Next Year

AMD has unveiled its ambitious projection, foreseeing a substantial uptick in the revenue generated by its artificial intelligence (AI) chips, expected to reach $2 billion by 2024. This strategic initiative is designed to position AMD as a formidable competitor in the AI market, vying with industry titan Nvidia.

However, the company is currently confronted with certain headwinds that may impact its financial performance in the fourth quarter. Notably, a subdued gaming market and a declining appetite for its adaptable chips within specific sectors have led to an outlook that falls below Wall Street's expectations.

In response to this challenging landscape, AMD is poised to introduce the MI300X chip, a pivotal move to challenge Nvidia's stronghold in the data center AI chip market. This particular chip is primed for the development of cutting-edge technologies reminiscent of ChatGPT.

Lisa Su, the CEO of AMD, has reported the promising commitment of "several major hyperscale customers" to deploy the MI300 chip. This typically alludes to major technology and cloud computing entities. The company is confident that the fourth-quarter revenues for the MI300 chip will surpass the earlier forecast of $300 million provided in August, aiming for an impressive $400 million. Lisa Su has also shared the company's bold sales projection for the MI300 chip in 2024, with an anticipated revenue target of $2 billion.

It's worth noting that recent U.S. sanctions, affecting chip exports to China, may compel AMD to seek special permissions for the sale of its top-tier AI chips to the Chinese market. These high-powered chips are slated for launch in the fourth quarter, with plans to scale up production capacity. Additionally, a reduction in capital expenditure by one of its key clients, Meta, could introduce additional pressures on the company's performance.

The overall performance in the fourth quarter has been impacted by subdued demand in various sectors, leading to revenue projections that fall short of Wall Street's expectations. While there's an ongoing resurgence in the personal computer market, sectors such as wireless communication, healthcare, and automotive have registered a slowdown in their demand for programmable chips.

AMD expects fourth-quarter revenue to hover around the $6.1 billion mark, with a variance of $300 million in either direction. Analysts enlisted by the London Stock Exchange Group (LSEG) are projecting revenue to reach $6.37 billion. Furthermore, AMD is anticipating an adjusted gross margin of 51.5%, which is marginally below the earlier anticipated margin of 52.1%.

In the third quarter, AMD reported a notable 4% increase in adjusted revenue, surpassing the $57 billion expectation with an actual figure of $58 billion. As per data from LSEG, the adjusted profit per share came in at $0.70, exceeding the analyst consensus of $0.68.

The third quarter results for AMD's data center business showcased remarkable stability, with revenues holding at $1.6 billion. In contrast, the customer department catering to the PC market witnessed an impressive 42% surge in sales, reaching $1.5 billion, indicating a notable resurgence in demand. Meanwhile, the embedded department, which includes programmable chips, experienced a 5% decline in revenue, settling at $1.2 billion, while gaming revenue dipped by 8% to $1.5 billion.