Here's a classic Wall Street paradox: a company beats expectations, and its stock gets punished. That's exactly what happened to Advanced Micro Devices Inc. (AMD) on Wednesday, as shares fell nearly 9% in premarket trading despite a second-quarter revenue beat.
The chipmaker reported revenue of $11.54 billion, topping the Wall Street estimate of $11.28 billion. But investors, it seems, were looking for more than just a beat. They wanted a blowout, and they wanted it specifically from Helios, AMD's upcoming rack-scale AI platform.
Futurum Group CEO Daniel Newman summed it up neatly: the results "were good," but investors were hoping for a "blowout guide driven by Helios."
AI Investment And Higher Expectations
Part of the concern likely stems from AMD's spending spree. Capital expenditures jumped to $808 million in the quarter, up from $282 million a year earlier and $389 million in the first quarter. That's a massive increase, and while it supports AMD's long-term AI ambitions, it can weigh on near-term sentiment.
Adding fuel to the fire, AMD's report came on the heels of a strong quarter from Intel Corp. (INTC). Intel's performance raised the bar for the entire semiconductor sector, making AMD's solid but not spectacular results look less impressive by comparison.
AMD Results Look Solid Despite Stock Pressure
Bernstein senior analyst Stacy Rasgon, who has an Outperform rating and a $600 price target on AMD, told CNBC he saw nothing wrong with the results. Revenue guidance and his earnings-per-share estimate were both above expectations, and gross margin was in line with forecasts.
So why the sell-off? Rasgon suggests investors may have been expecting more after Intel's strong report, even though AMD expects data center growth to accelerate in the second half of the year. It's a classic case of expectations running ahead of reality.
Analyst Sees AI Ramp And Strong Demand
Looking ahead, Rasgon sees AMD's AI opportunity expanding further in the fourth quarter as Helios ramps up. He believes the AI chip market is large enough for AMD to grow alongside NVIDIA Corp. (NVDA) and other competitors.
Demand for server CPUs remains "exceptionally strong," with customers buying as much supply as vendors can deliver. While Intel continues to sell products despite acknowledging competitive challenges, Rasgon says AMD has products that customers are actively seeking.
Investors will be looking for more detail from AMD on the pace of data center growth, the Helios rollout, potential revenue contributions from Anthropic, and the outlook for the client business.
AMD Top ETF Exposure
- iShares Semiconductor ETF (SOXX): 8.47% weighting
- ARK Next Generation Internet ETF (ARKW): 8.31% weighting
- Dan Ives Wedbush AI Revolution ETF (IVES): 7.19% weighting
Because AMD is a large holding in these funds, significant ETF inflows or outflows can trigger automatic buying or selling of the stock.
Price Action
Advanced Micro Devices shares were down 8.80% at $472.94 during premarket trading on Wednesday, according to market data.
