Soaring chip stocks hit as AMD’s forecast fails to impress

by | Jan 31, 2024 | Business

By Medha Singh

(Reuters) -High-flying semiconductor stocks slipped on Wednesday after Advanced Micro Devices’ disappointing current-quarter revenue forecast added to investor worries over sluggish demand for non-AI chips.

AMD targets revenue of $5.4 billion, plus or minus $300 million for the first quarter, below analysts’ estimate of $5.73 billion, according to LSEG data. That overshadowed the company near doubling its AI processor projections to $3.5 billion for 2024.

After “expectations for AMD (reached) a fever pitch in recent weeks and months.. resetting those expectations is not necessarily a bad thing,” said Bernstein analyst Stacy Rasgon.

That said, “the uber-bullish expectations for datacenter GPUs are probably out of reach at least in 2024.. making an expensive stock even more so.”

Shares of Santa Clara, California-based AMD dropped 5.5% to $162.75 on Wednesday, pulling down Nvidia, Micron Technology, Qualcomm, Broadcom and Intel. The losses were on track to erase about $60 billion of the chipmakers’ combined market value.

The Philadelphia semiconductor index fell 1.7% after climbing 50% over the past 12 months.

AMD’s update follows Intel’s bleak first-quarter revenue outlook on Thursday, as the chipmaker plays catch-up in the AI race while also dealing with a weak PC market.

Demand from cloud computing companies remained “soft,” CEO Lisa Su said. A supply glut in the automotive and industrial industries weighed on the company’s programmable chips business.

Revenue from AMD’s gaming segment also shrank in the fourth quarter from a year earlier.

The company’s price-to-earnings (PE) ratio at 43.87 is the highest among the biggest U.S. chipmakers, per LSEG data.

By comparison, Intel’s PE multiple is 29.78, Nvidia at 30.18, Qualcomm 14.94 and Micron’s 34.33. Comparatively, a lower multiple reflects an attractive investment opportunity.

At least five brokerages raised their price targets on AMD, pushing its median price target to $190 and implying a 10.4% expected rise in shares over the next 12 months.

“Was a high bar, no doubt, but AMD delivered where it mattered,” said TD Cowen analysts.

(Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)


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