AMD Beats Q4 Expectations but Stock Falls on AI Competition and PC Sales Slowdown

Advanced Micro Devices (AMD) reported strong fourth-quarter earnings after Tuesday's market close, exceeding analysts' estimates on revenue and earnings per share (EPS). The chipmaker also provided an optimistic outlook for the first quarter.

Financial Performance

AMD reported EPS of $1.09 on revenue of $7.56 billion for the quarter. Analysts had forecast EPS of $1.09 on revenue of $7.5 billion. The company's data center business, its primary revenue generator, brought in $3.9 billion, slightly below expectations of $4.09 billion. The client segment, encompassing PC chips, generated $2.3 billion, surpassing estimates of $1.98 billion. Gaming revenue reached $563 million, beating Wall Street's forecast of $487 million.

Q1 Forecast

AMD anticipates revenue between $6.8 billion and $7.4 billion for the current quarter, slightly below analysts' expectations of $7.0 billion.

Market Challenges

Despite the positive financial results, AMD stock declined over 3.5% in after-hours trading. The company faces intense competition in the AI space from NVIDIA (NVDA), the dominant player in high-powered AI chips. Additionally, the slowdown in PC sales continues to impact AMD's client segment, despite industry efforts to promote AI PCs for increased processing power.

Impact of Tariffs

The Trump administration's 10% tariffs on Chinese goods could have implications for the broader electronics market, including servers and PCs, which are predominantly manufactured in China. While the majority of high-end chips are produced elsewhere, increased prices on these systems and devices could affect sales for chip manufacturers like AMD. Trump has also hinted at potential tariffs targeting semiconductors, potentially raising consumer prices in the long term.