For all the focus on Nvidia (NASDAQ:NVDA), Advanced Micro Devices’ (NASDAQ:AMD) strategy in the AI space is steadily gaining momentum. While it has yet to benefit significantly from its high-end AI accelerators, the company is set to ship these in Q4. Moreover, large-scale cloud service providers have been considering these accelerators as alternatives to Nvidia. Could there be a setup for AMD stock to outpace Nvidia in terms of overall momentum?
AMD Q2 revenue down, but AI keeps spirits, expectations high By Dan O'SheaAug 1, 2023 06:13pm AMDearnings reportartificial intelligence (AI)data center AMD Analyst Day, new brand AI customer engagements jumped during the second quarter compared to the previous quarter, AMD CEO Lisa Su said. (AMD) AMD reported revenue of just under $5.4 billion for the second quarter of 2023, a figure that was higher than analyst expectations and its own guidance for the quarter, though down about 18% compared to the same quarter last year, and only slightly above its revenue mark for the first quarter this year.
Still, beating expectations and setting an optimistic tone for the future goes a long way with semiconductor investors these days, and AMD’s stock price was up about 3% immediately after its earnings report as the company continued to ride a wave of AI interest that has been boosting most sector stocks lately.
AMD CEO Lisa Su suggested on the firm’s second quarter earnings call that despite current weak demand in some segments AI is driving growing customer activity.
“AI customer engagements grew by more than seven times sequentially as multiple customers initiated or expanded programs supporting future deployments of our Instinct MI250 and MI300 hardware and software at scale,” Su said.
She added, “Our AI strategy is focused on three areas. First, deliver a broad portfolio and multiple multi generation roadmap of leadership GPUs, CPUs, and adaptive computing solutions for AI inferencing and training. Second, extend the open and proven software platform we have established that enables our AI hardware to be deployed broadly. And third, expand the deep and collaborative partnerships we have established across the ecosystem to accelerate deployment of AMD-based AI solutions at scale. We delivered on all three fronts in the second quarter.”
Furthermore, she said, “While we are still in the very early days to the new era of AI, it is clear that AI represents a multi-billion dollar growth opportunity for AMD across cloud, edge, and an increasingly diverse number of intelligent endpoints. We have increased our AI-related R&D, ecosystem-enablement, and go-to-market investments to capture a significant share of this emerging market.”
Taking a closer look at the numbers, data center segment revenue was $1.3 billion, down 11% year-over-year primarily due to lower 3rd Gen EPYC processor sales as enterprise demand was soft and cloud inventory levels were elevated at some customers, according to AMD’s earnings statement. However, revenue increased 2% sequentially, as 4th Gen AMD EPYC CPU revenue nearly doubled, and EPYC CPU enterprise sales increased, partially offset by a decline in adaptive system-on-a-chip data center products.
Su also indicated that the newest AMD Instinct MI300A and MI300X GPUs are sampling to leading HPC, cloud and AI customers.
Analysts have been hungry for updates from AMD on the AI front, and Third Bridge analyst Lucas Keh wrote in a research note after the earnings report, "Given their successful execution of a 4th quarter ramp up of their MI300 accelerators, our experts believe that can begin to take low single-digit share away from Nvidia as early as the end of this year.”
Meanwhile, client segment revenue was $998 million, down 54% year-over-year due to reduced processor shipments resulting from a weaker PC market and a significant inventory correction across the PC supply chain, the earnings statement said. Again, though, the future looks brighter, as the company suggested the third quarter would be better in this segment as market conditions continue to improve. Su also said that AMD sees generative AI as a future driver of PC market growth, bringing some long-term optimism to a market that has been a rollercoaster ride for most semiconductor companies in recent years.
Gaming segment revenue was $1.6 billion, down 4% year-over-year, and finally, embedded segment revenue was a bright spot, coming in at $1.5 billion, up 16% year-over-year primarily driven by strength in the industrial, vision and healthcare, automotive, and test and emulation markets.
For the third quarter of 2023, AMD expects revenue to be approximately $5.7 billion, plus or minus $300 million.
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