AMD’s AI ambitions stumble as stock lags behind Nvidia’s 160% surge

Advanced Micro Devices Inc. (AMD) is considered Nvidia Corp.’s major rival in the development of AI chips but has been lagging behind. The company’s stock has declined by approximately 25% from the end of 2023 and has recently touched the lowest level since November of that year.

In contrast, Nvidia increased by 160%, and the Philadelphia Stock Exchange Semiconductor Index increased by more than 20% over the same period.

AMD sparks investor concerns by withholding AI guidance

One of the most significant negatives for investors was that during AMD’s most recent earnings call, the company, led by CEO Lisa Su, decided not to give guidance on the annual forecast for its key AI accelerator product.

Ted Mortonson, managing director of Robert W Baird & Co., said Su didn’t provide any catalyst for the next six months. He also noted that those who own a large number of shares and hope for a better story for the first half of 2025 could not gain anything from the call.

Mortonson also pointed out that AMD’s reluctance to discuss generative AI revenue raises concerns about the company’s ability to challenge Nvidia in the AI chip market. According to IDC, Nvidia currently holds the biggest share of worldwide server GPU unit shipments at 89%, while AMD stands at 10.3%.

Despite the negative market reaction to AMD’s earnings call, the company’s earnings report contained some positive notes. Overall, the company did better than expected in terms of revenue and gave a positive outlook. However, Su’s comment that sales of its AI accelerator chips in the first half of 2025 would be about equal to those in the second half of 2024 spooked investors who had been expecting growth to keep on rising.

AMD’s new AI chip, which it plans to launch in mid-2025, is expected to enhance sales, but there are concerns about the company’s capability to grow its AI business fast enough in a fast-growing market.

Concerns grew more pronounced as DeepSeek from China demonstrated its ability to produce outcomes at a lower cost and potentially alter the landscape of AI infrastructure investment. 

Citi lowers AMD outlook as analysts question its AI strategy

After AMD’s earnings call, Citi lowered its view of the company due to the absence of AI revenue guidance and possible risks. Other firms, including Bank of America, HSBC, and Melius Research, have also shared their concerns about AMD’s competitive standing against Nvidia.

Despite these setbacks, AMD is still a major player in the AI race as many tech companies increase their spending on AI. Alphabet Inc. has announced $75 billion in capital spending on AI infrastructure, and Amazon.com Inc. is also spending heavily on the sector.

However, investors remain skeptical even as AMD’s stock has moved to trade at less than 23 times its earnings estimate, which is well below its five-year average. The stock is also about 35% below the average analyst price target, which can indicate that the stock has room to rise. Some people see this as a low-sentiment buying opportunity for AMD.

Mortonson, from Baird, called the post-earnings decline a very reactive sell. He said that AMD now seems like a less risky investment, something that’s starting to pique his clients’ interest. He said his clients like to buy when others are panicking and sell when others are buying, so buying AMD at the moment is in line with that approach.

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