AMD Stock: Chipmaker returns to growth in Q3

Chip maker Advanced micro devices (AMD) beat Wall Street’s targets for the third quarter but missed its forecasts for the current period. However, AMD also expects higher-than-expected sales of new AI chips for data centers. This news boosted AMD shares on Wednesday.

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The Santa Clara, California-based company said late Tuesday that it earned an adjusted 70 cents per share on sales of $5.8 billion in the September quarter. Analysts polled by FactSet had expected AMD earnings of 68 cents per share on sales of $5.7 billion. On an annual basis, AMD’s sales and profits increased by 4%.

Heading into its third-quarter report, AMD has posted four consecutive quarters of year-over-year earnings declines. Sales declined for two consecutive quarters amid declining demand for traditional PCs and servers.

For the fourth quarter, AMD expects to achieve sales of $6.1 billion, up 9% from the same period last year. However, analysts were expecting fourth-quarter sales of $6.39 billion.

AMD stock rises after the report

AMD tempered its weak Q4 outlook by forecasting strong sales for its MI300 AI accelerators. The company expects sales of the new product to exceed $2 billion in 2024. It also expects sales of $400 million in the fourth quarter as production increases. AMD officially plans to launch its MI300 accelerators at the December 6 event.

MI300 sales forecasts “stole the show,” Susquehanna Financial Group analyst Christopher Rowland said in a client note. It was a model for sales of less than $1.5 billion next year. Rolland rates AMD stock positive with a price target of 130.

Wall Street estimates for MI300 sales next year ranged from $1 billion to $1.5 billion.

With the MI300, AMD has positioned itself as a clear alternative to the market leader Nvidia (NVDA) in artificial intelligence chips, Wedbush Securities analyst Matt Bryson said in a client note. He reiterated his outperform rating on AMD shares but lowered his price target to 130 from 155.

Analysts lower price targets on AMD shares

In morning trading on the stock market today, AMD shares jumped 5.9% to 104.33.

Meanwhile, at least 15 Wall Street analysts cut their price targets for AMD shares after the company’s Q4 guidance fell flat.

“In the fourth quarter, we expect to see strong data center growth and continued customer momentum, partially offset by lower sales in the gaming segment and additional decline in demand in the combined markets,” CFO Jan Ho said in a press release. New release.

CEO Lisa Su credited strong sales of Ryzen 7000 series PC processors and record server processor sales during the third quarter.

“Our data center business is on a significant growth trajectory based on the strength of our Epyc CPU portfolio and Instinct MI300 accelerator shipments to support multiple deployments with large-scale, enterprise and AI customers,” Su said in a statement. statement.

AMD ranks fourth in the industry group

Last week, a competitor Intel Corporation (you are K) reported an impressive third-quarter report thanks to an improving PC market.

Advanced Micro Devices ranks a strong fourth among 37 stocks in IBD’s Semiconductor industry group, according to IBD inventory check. AMD stock has an IBD Composite Rating of 91 out of 99.

Meanwhile, Intel ranks seventh out of 32 stocks in IBD’s Semiconductor Industry Group. Intel has an IBD Composite Rating of 62.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.

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