AMD forecasts challenger to Nvidia AI chip to launch in 4th quarter, shares rise

By Max A. Cherney and Chavi Mehta

(Reuters) -Advanced Micro Devices on Tuesday forecast a strong fourth quarter and expects to have artificial-intelligence hardware that can challenge Nvidia (NASDAQ:) chips by then.

Shares were up roughly 3.5% in after-hours trading.

AMD CEO Lisa Su said AMD is set to ramp production of its MI300 artificial-intelligence chips in the fourth quarter. The MI300 AI accelerator chips are designed to compete against the advanced H100 chips already sold by Nvidia, though they are in short supply.

Su said customer interest in the company’s MI300 series chips is “very high” and that AMD expanded its work with “top-tier cloud providers, large enterprises and numerous leading AI companies” during the third quarter.

Investors are betting AMD could one day challenge Nvidia in the surging market for advanced AI chips when AMD releases a competing product later this year. AMD has not given a detailed full-year forecast but said it expects sales in its data center business that will contain MI300 sales to be higher in 2023 than 2022’s $6.04 billion total.

Jenny Hardy, portfolio manager at GP Bullhound, which owns Nvidia and AMD stock, said that Nvidia still faces supply constraints, leaving an opening for AMD’s chip.

“So if AMD can ramp production and launch those MI300 chips in the fourth quarter, they will likely see strong demand because plenty of people cannot get their hands on Nvidia chips. So we would assume that AMD can effectively kind of fill some of that supply-demand gap,” Hardy said.

For the second quarter, revenue at AMD’s data center business fell 11% to $1.32 billion, while revenue at its client business fell 54% to $998 million from $2.2 billion a year ago.

Large cloud players like Microsoft (NASDAQ:) and Google (NASDAQ:) plan to ramp up spending on data centers in the second half of the year and that spending will skew toward AI chips and infrastructure, analysts said.

However, PC shipments decline has moderated and demand has started showing signs of improvement.

“Looking to the third quarter, we expect our Data Center and Client segment revenues to each grow by a double-digit percentage sequentially driven by increasing demand for our EPYC and Ryzen processors, partially offset by Gaming and Embedded segment declines,” said AMD finance chief Jean Hu.

The company forecast current-quarter revenue of about $5.7 billion, plus or minus $300 million. Analysts polled by Refinitiv expect revenue of $5.82 billion.