(Reuters) – Chipmaker Advanced Micro Devices forecast first-quarter revenue below market estimates on Tuesday, as it grapples with uncertain demand for its AI server chips and a cyclical slump in sales of its programmable processors.
Shares of the Santa Clara, California-based company fell nearly 6% in trading after the bell.
As companies look to develop and operate their own generative AI applications, enterprise budgets are being funneled into processors used in AI servers. This, in turn, has hit demand for traditional server chips, which account for a large chunk of AMD’s data center revenue.
While CEO Lisa Su said in December AMD’s supply of AI chips for 2024 is “well above” $2 billion worth, the company’s share of the AI chip industry is miniscule in comparison to leader Nvidia’s nearly 80% market share.
The market for programmable chips, which can be customized to perform a variety of functions, has also faltered in the past quarters as industries like automotive and industrial are being hit by a chip supply glut owing to weak end-market demand.
Rival Intel also flagged corrections in programmable chip inventories across industries on a post-earnings call, which it said are expected to last through the first half of the year.
AMD expects revenue of $5.4 billion, plus or minus $300 million, for the current quarter, compared with analysts’ average estimate of $5.73 billion, according to LSEG data.
On an adjusted basis, AMD forecast gross margin of about 52% for the first quarter, compared with the estimate of about 51.7%.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)
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