AMD shares rise after strong sales forecasts

Advanced Micro Devices Inc. has provided a strong sales forecast for the current quarter, indicating that the chip maker continues to make strides in its most profitable market: data center processors.

AMD has forecast second-quarter sales of approximately $ 6.5 billion, compared to an average analyst estimate of $ 6.03 billion.

This helped push the shares up 8.3% in late trading on Tuesday.

The outlook helped allay concerns about the slowdown in the chip market and signaled that AMD is making further gains on Intel Corp.

The company, which has lagged far behind Intel in computer processors for years, is poised to end 2022 with nearly four times the revenue of 2019.

New products and better execution have helped AMD win customers who were once skeptical of its capabilities.

AMD’s outlook is at odds with a recent prediction from Intel, which was hurt by a stock buildup at some of its PC customers.

The return of Covid-related lockdowns in parts of China has also reduced the supply of components needed to complete the devices, Intel said. Other chip makers, such as Texas Instruments Inc., have said that even these disruptions are hurting growth.

AMD’s forecasts include a boost from the acquisition of Xilinx Inc., a deal it completed in the first quarter.

“Each of our businesses has grown a significant double-digit percentage year-over-year,” said Lisa Su, CEO of AMD. The growth of the existing business and the acquisition of Xilinx both helped bolster expectations for the full year, she said.

AMD reduced its expectations for the personal computer market this year.

The company previously hadn’t predicted growth in PC shipments since 2021, but now expects a drop in the single-digit percentage range, Su said. AMD will be less affected by this because it is still gaining share, particularly in the more expensive models, he said.

Despite AMD’s rapid growth, investors shied away from the stock this year as part of a broader withdrawal for semiconductor equities.

Investors have been particularly wary of chip makers who have made rapid gains over the past three years, fearing a slump is near. AMD closed at $ 91.13 in New York on Tuesday, down 37% this year.

The latest prediction suggests that AMD still has momentum.

Under Su, the company developed cutting-edge components and outsourced production, which its predecessors struggled to do. This has led to more chip customers ditching Intel in favor of AMD.

Intel CEO Pat Gelsinger, who took the helm last year, is planning his own breakthrough.

Now he says his company offers better PC processors than AMD and will regain market share.

Unlike Intel, which manufactures its products in-house, AMD partners with Taiwan Semiconductor Manufacturing Co., giving it access to better technology.

Using the latest manufacturing techniques can improve how chips process data and how much information they store.

Although TSMC has surpassed Intel in terms of technological capabilities, it has struggled to meet the demand for the chips.

But AMD has an edge over other TSMC customers. His products are some of the more expensive items that come out of Taiwanese factories, which in theory makes him in a better position to get the supplies he needs.

AMD is also the second largest manufacturer of graphics chips used in add-on cards by PC gamers.

It competes in that market with Nvidia Corp. and will face new opposition from Intel, which has begun offering products for that segment for the first time in years.

AMD, headquartered in Santa Clara, California, supplies graphics chips used in Microsoft Corp.’s Xbox and Sony Corp.’s PlayStation.

AMD reported first-quarter earnings of $ 1.13 per share, excluding some rumors, well above the estimate of 92 cents.

Sales increased 71% to $ 5.9 billion, surpassing projections of $ 5.3 billion. The first quarter also included the contributions of Xilinx.

The chip maker expects annual revenue of $ 26.3 billion for 2022, a 60% gain over the previous year. This compares with an average estimate of $ 24.1 billion.

AMD is gaining ground with major buyers of computer processors who own the giant data centers that are the backbone of the Internet.

According to Jefferies & Co. analyst Mark Lipacis, approximately 48% of all new processors installed in these data centers were purchased by AMD in March.

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