By Kanchana Chakravarty and Zaheer Kachwala
(Reuters) -Advanced Micro Devices shares tumbled more than 10% on Wednesday after the company’s AI chip revenue failed to meet lofty expectations, reinforcing its struggles to grab market share from well-entrenched market leader Nvidia.
The company’s fourth-quarter data center revenue – a proxy for its AI performance – jumped 69% to $3.9 billion, compared with the consensus estimate of $4.15 billion.
“AMD may still be taking market share from Intel in the central processing unit (CPU) side of things, but it remains a long way behind Nvidia and is struggling to catch up when it comes to graphics processing units (GPU),” said Ben Barringer, technology analyst at Quilter Cheviot.
“Investors want the company to take the fight to Nvidia, but for now it is very much struggling to break the moat and disrupt its market position,” he added.
AMD is set to lose more than $19 billion of its market capitalization if current losses hold. Shares fell 18% last after more than doubling in 2023 on expectations of the company riding the AI boom. Meanwhile, Nvidia’s stock gained 171% in 2024.
An increasing push by tech giants including Microsoft and Meta —both AMD customers — to develop in-house chips that are cheaper and more efficient could also dampen demand for AMD’s off-the-shelf processors.
BofA analysts said as Nvidia continues to outperform and custom chips gain more traction at hyperscalers, it might be hard for AMD to “win” the AI narrative despite its strong growth levels.
The arrival of Chinese AI firm DeepSeek’s low-cost model has made investors more sensitive, said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
AMD’s results and outlook have “knocked confidence further”, she added.
At least 22 analysts have cut their price targets on the stock, with the median now at $150, compared to $166.5 before the results.
AMD’s 12-month forward price-to-earnings ratio stands at 23.39, compared with Nvidia’s 26.27.
(Reporting by Kanchana Chakravarty and Zaheer Kachwala in Bengaluru and Amanda Cooper in London; Additional reporting by Purvi Agarwal; Editing by Harry Robertson, Varun H K and Sriraj Kalluvila)
