Advanced Micro Devices beat first-quarter revenue estimates by a small margin on Tuesday as tepid demand for semiconductors used in traditional data centers added to weakness in the market for gaming chips.
Shares of the Santa Clara, California-based company fell 3% in extended trading.
Enterprises rushing to adopt generative AI have prioritized spending on AI server chips, hitting demand for traditional server semiconductors, which constitute a large portion of AMD‘s revenue. These processors cannot effectively handle the complex tasks associated with AI.
While some of AMD’s central processors are used in conjunction with AI chips, the ratio is skewed in favor of the more advanced processors.
AMD trails front-runner Nvidia in the booming market for artificial intelligence server semiconductors, where Nvidia commands about 80% of the share.
Uncertain demand from the gaming market has further hurt AMD. Personal computing and console gaming revenue growth is expected to remain below pre-pandemic levels through 2026, according to research firm Newzoo.
Weakness has also evaded AMD’s embedded segment, which caters to markets such as automotive and industrial. Ongoing inventory corrections have hit revenue from this segment as clients clear out a build-up of chips.
The company forecast revenue of about USD 5.70 billion, plus or minus USD 300 million, for the second quarter, in line with analysts’ average estimate, according to LSEG data.
It reported revenue of USD 5.47 billion for the first quarter, compared to analysts’ average estimate of USD 5.46 billion.
