TLDR
- AMD stock fell over 6% after Q2 earnings despite 32% revenue growth to $7.7 billion, as investors worried about slower data center growth
- Client PC processor segment surged 69% to $3.6 billion driven by AI-capable Ryzen 9000 processors with built-in neural processing units
- Data center revenue growth of only 14% was hurt by $800 million inventory writedown due to China export restrictions
- AMD expects to resume China shipments with 15% government fee and ramp up MI350 AI accelerator production in second half
- Company forecasts 28% revenue growth next quarter, excluding potential China sales, with AI PC market expected to grow 42% annually through 2028
AMD stock tumbled over 6% following second-quarter earnings despite posting impressive revenue growth. The chip maker reported 32% year-over-year revenue growth to $7.7 billion.
Investors focused on data center performance instead of the bigger picture. AMD’s data center revenue grew just 14% compared to Nvidia’s 73% surge.
The real story was AMD’s client PC processor business. This segment exploded 69% higher to $3.6 billion in quarterly revenue.
AMD hit record sales for desktop and notebook processors. Client graphics card sales also improved during the quarter.
AI Processors Drive Record Sales
The Ryzen 9000 series processors powered much of this growth. These chips include neural processing units for AI tasks.
AMD designed these processors to run AI assistants and content creation tools. They handle Microsoft Copilot without requiring cloud connectivity.
Market research firm IDC expects AI PC shipments to grow 42% annually through 2028. Nearly 95% of PCs will include neural processing units by 2028.
AMD already integrates NPUs into client processors. The company launched graphics cards that accelerate AI workloads locally.
GPU shipments supporting AI workloads should be 60% higher in 2028 versus 2023. This creates another growth path for AMD’s client business.
Data Center Setback Appears Temporary
The data center slowdown had specific causes. AMD wrote down $800 million in GPU inventory due to China export restrictions.
This writedown masked strong demand for Epyc server processors. Cloud providers like Oracle and Google are adopting these chips.
Recent Washington developments should help AMD recover. The company expects to resume China shipments while paying 15% of AI chip revenue to the U.S. government.
CEO Lisa Su said shipments to other customers will increase in the second half. AMD’s MI350 AI accelerators are ramping for “large-scale production deployments.”
AMD forecasts 28% revenue growth for the current quarter. This projection excludes potential China sales.
Valuation Remains Attractive
AMD trades at 9.5 times sales, matching the technology sector average. The valuation looks reasonable given AI growth prospects.
The combination of AI PC adoption and data center recovery should drive faster growth. Wall Street may reward stronger performance with higher valuations.
AMD’s quarter shows multiple growth engines as AI reshapes computing. China restrictions created temporary headwinds while underlying AI trends stay strong.
The company resumed China shipments in late July with the new fee structure in place.
