AMD tumbles after giving disappointing outlook for AI growth

The company said it will have better products out starting around the middle of the year, helping bolster the second half. In the first half of 2025, revenue from the AI chips will be similar to where it was in the second half of 2024, AMD said.

Advanced Micro Devices Inc. tumbled in late trading after giving a disappointing outlook for its data center business, an area where it’s struggling to catch up with AI computing leader Nvidia Corp.

The division will grow by a percentage in the “strong” double digits this year, AMD said on a conference call with analysts, predicting that the second half would be better than the first. But in an industry that’s seen Nvidia’s sales double during each of the past two years, that wasn’t enough to impress investors.

Shares of the chipmaker slid more than 8% in extended trading after the report was released. The stock had already dropped 1.1% this year through Tuesday’s close.

Though AMD’s fourth-quarter overall revenue topped estimates — and it provided an solid forecast for the current period — the data center numbers overshadowed the other results.

The report renewed concern that AMD’s push into AI equipment has lost some momentum — confirming the fears of analysts and investors. That sentiment was stoked in recent weeks by the arrival of a Chinese startup with a cheaper approach.

Revenue in the data center division was $3.86 billion during the fourth quarter. That jumped 69% from a year earlier, but analysts had projected $4.09 billion. On average, analysts are predicting that the unit will generate $18.4 billion in 2025. That would be growth of 46% from 2024.

Though AMD won market share from Intel Corp. in personal computers and servers last quarter, that area is less of a growth driver. PC chips brought in $2.3 billion in revenue last quarter, topping the $1.99 billion estimate.

AMD is trying to persuade some of the biggest companies in the world to include its AI products in their data center expansion plans. It’s still playing catch-up with Nvidia in this endeavor. Though AMD now generates more than $5 billion in annual revenue from the accelerator chips that help develop AI models, Nvidia’s sales in this category exceed $100 billion a year.

AMD’s total fourth-quarter revenue rose 24% to $7.66 billion, topping the $7.54 billion estimate. Earnings per share amounted to $1.09, minus certain items, in line with predictions.

Total sales will be $6.8 billion to $7.4 billion in the current quarter, AMD said. Analysts estimated $7.04 billion on average.

AMD was bullish about 2025 on a conference call with analysts, saying that demand for all its product groups would improve. Overall, the company sees “strong double-digit percentage revenue and EPS growth year over year,” Chief Executive Officer Lisa Su said during the call.

The company said it will have better products out starting around the middle of the year, helping bolster the second half. In the first half of 2025, revenue from the AI chips will be similar to where it was in the second half of 2024, AMD said.

“Clearly, we’re going through a little bit of a product transition,” Su said.

In PCs, the market will grow by a percentage in the mid-single digits. Share gains will mean that AMD’s PC division grows at a faster pace than the overall market, Su said. The company’s plans for future accelerator chips are on track and customer interest is strong, she said.

Chinese startup DeepSeek said last month that it was able to develop a competitive AI model at the fraction of the expense incurred by larger US companies. That announcement provoked a selloff in AI-related stocks, including AMD and Nvidia, on concern that the huge projected outlay on new hardware won’t be necessary.

AMD also supplies custom processors for Microsoft Corp. and Sony Group Corp. for their game consoles. That unit has seen weaker sales, hurt by the current generation of machines nearing the end of their life cycles. Gaming revenue fell 59% to $563 million in the fourth quarter.