BENGALURU - Advanced Micro Devices (AMD) shares fell 8% on Wednesday following a revenue forecast that disappointed investors anticipating greater gains from the AI sector.
The company's market value could decrease by approximately $20 billion based on premarket activity. Despite a significant rise of nearly 156% in shares since the end of 2022 due to increased chip demand from generative AI, AMD's soft quarterly revenue forecast and a $5 billion sales target for AI chips by 2025 indicate that production is struggling to keep pace with demand.
CEO Lisa Su acknowledged that chip supplies will remain tight into the next year. Analyst Stacy Rasgon from Bernstein noted that it is concerning for an AI-focused company to provide guidance that is merely in line with expectations, suggesting that current AI performance may not meet investor hopes.
Other chip manufacturers, including Arm and Qualcomm, also experienced declines of over 2%. In contrast, Nvidia, a leader in AI chips, saw a minimal drop of 0.3%, indicating investor confidence in its supply chain.
AMD, which relies on TSMC for chip manufacturing, faces scrutiny as analysts express doubts about its ability to exceed current sales expectations, which range between $8 billion and $9 billion for 2025. Following the forecast, at least 10 analysts revised their target price downward for AMD shares, while 8 increased their outlook, adjusting the median target to $187.50, reflecting a potential upside of nearly 13% from the last closing price.
AMD's stock trades at nearly 32 times its 12-month forward earnings estimates, compared to Nvidia's 36 times.