Zhitong App learned that AMD, the dual industry giant of CPU and GPU, announced its Q4 earnings on Wednesday morning Beijing time, and raised its revenue forecast for the newly launched artificial intelligence (AI) chip, the Instinct MI300 series, by $1.5 billion to $3.5 billion in 2024. However, for some Wall Street analysts who have given AMD high stock price expectations and high valuations, this forecast is far from enough. Wolfe Research analyst Chris Caso said that the most optimistic expectation on Wall Street has reached $8 billion, while the lowest forecast is $4 billion.
AMD has raised its revenue forecast for the new AI chip to $3.5 billion, nearly doubling it, but this is not enough to meet the high expectations of Wall Street for the company's AI business, nor is it enough to alleviate the negative impact of the significant decline in revenue from its programmable chips and electronic gaming chips. In addition, the revenue forecast for the first quarter announced by the chip giant on Wednesday morning is lower than Wall Street's expectations.
AMD expects a total revenue range of $5.1 billion to $5.7 billion for Q1, which is lower than the analysts' average expectation of $5.77 billion; the gross margin is expected to be 52%, slightly higher than the analysts' expectation of 51.8%. AMD also expects that the revenue of its main business, including personal computer chips, in the first quarter will decline, but the sales growth of AI chips will fully offset the decline in revenue from personal computer chips.
The core performance indicators for Q4 2023 exceeded Wall Street's expectations. AMD's revenue for the fourth quarter was $6.17 billion, higher than the Wall Street analysts' general expectation of $6.1 billion. The company's earnings per share for the fourth quarter were $0.77, in line with expectations. However, the operating profit for the fourth quarter was $1.41 billion, slightly lower than Wall Street's expectation of $1.43 billion.
&#34;Overall, AMD's performance for the quarter was mediocre, with a significant decline in operating profit and operating profit margin,&#34; said Jesse Cohn, an analyst at Investing.com. &#34;In the face of high market expectations, the company has little room for error, and investors are clearly very disappointed with the forward-looking guidance for the current quarter.&#34;
LSEG data shows that AMD executives expect current quarter revenue to be $5.4 billion, with a fluctuation range of $300 million, while the average Wall Street expectation is $5.77 billion. The company has not issued an earnings per share guidance.
In the past year, AMD's stock price has soared by about 140%, outperforming the global chip stock benchmark, the PHLX Semiconductor Index, by nearly 90 percentage points. Since 2024, AMD's stock price has risen by as much as 17%, and it has recently hit multiple all-time highs. After the earnings report was released, the stock price of this chip company based in Santa Clara, California, fell by about 7% in after-hours trading, hovering around $160.
AMD CEO Lisa Su stated during a conference call that if chip manufacturers with whom they collaborate increase their production capacity in the second half of this year, the company's sales of AI chips could exceed their current forecast of $3.5 billion.
As global enterprises are increasingly seeking to develop and operate their own AI applications, similar to ChatGPT, budgets are flowing towards processors used in AI servers, such as Nvidia's H100 and AMD's flagship AI chip, the MI300X AI chip, which was launched at the end of last year.
However, for AMD, a &#34;latecomer&#34; in the AI chip field, the good news is that most global enterprises are looking for alternative products to Nvidia's expensive and severely supply-constrained advanced AI chips. AMD's newly launched MI300X AI chip is one of the few viable alternatives in the market. Prominent tech stock analyst Beth Kindig predicts that the shipment volume of the MI300 series chips will reach 300,000 to 400,000 units next year, while the shipment volume of Nvidia's H100 will reach 1.5 to 2 million units.
However, Wall Street's expectations for AMD's AI chip in 2024 are higher than $3.5 billion. According to Summit Insights analyst Kinngai Chan, Wall Street analysts' previous market size forecasts for AMD's AI chip in 2024 ranged from $4 billion to $8 billion, with KeyBanc and other Wall Street investment institutions giving an $8 billion expectation. The target stock price of $200 and the higher stock valuation given by Wall Street are closely tied to these figures.
KeyBanc Capital Markets analyst John Vinh recently reiterated a &#34;buy&#34; rating for AMD and raised the target price from $170 to $195. Vinh believes that AMD will be one of the biggest beneficiaries in the AI chip field, and he expects that although the demand for gaming and programmable chips is difficult to predict, AMD's sales of new AI chips could reach $8 billion in 2024, far exceeding the institution's previous estimate of $3 billion to $4 billion.
With optimistic expectations for strong demand for AI chips, Barclays analyst Tom O'Malley significantly raised AMD's target stock price from $120 to $200, and stated that AMD's AI chip sales this year could reach at least $4 billion, surpassing $7 billion in 2025.
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<h2>Why is Wall Street &#34;asking for a lion's share&#34;? Because the demand for AI chips has a vast prospect</h2>
It is not illogical for Wall Street to &#34;ask for a lion's share&#34; by predicting that the market size of AMD in the field of AI chips will be between 4 billion and 8 billion US dollars in 2024. After all, the current demand for AI chips is extremely strong, and most companies around the world are looking for alternatives to Nvidia's H100.
Currently, Nvidia is almost a monopoly in the field of AI chips, with a market share of nearly 90%. Citigroup predicts that the market size of AI chips will be around 75 billion US dollars next year, and it is expected that AMD will be able to occupy about 10% of the market share.
Tesla CEO Elon Musk has likened the AI arms race among technology companies to a high-stakes &#34;poker game,&#34; where companies need to invest billions of dollars each year in AI hardware to stay competitive.
The billionaire stated that by 2024, Tesla will spend over $500 million on AI chips from Nvidia alone, but he warned that Tesla will need &#34;billions of dollars&#34; worth of hardware in the future to catch up with some of the largest competitors. It is worth noting that Musk stated in an article on X that Tesla will purchase a large number of AI chips from Nvidia and its competitor AMD this year.
AMD stated that the MI300X is based on a brand-new architecture, which usually brings significant performance improvements. The most notable feature of AMD's new AI chip is its 192GB cutting-edge high-performance HBM3 memory, which enables faster data transmission and can accommodate larger-scale AI models.
Comparative data on the latest performance of the Nvidia H100 AI chip, which is the hottest in the AI training/inference field, shows that the MI300X is on par with the H100 in the AI training field. However, in the inference field, based on the general LLM core TFLOP, the MI300X provides up to a 20% performance improvement over the Nvidia H100 in FlashAttention-2 and Llama 2 70B. From a platform perspective, comparing the 8x MI300X solution with the 8x Nvidia H100 solution, AMD found that the gain of Llama 2 70B is much greater, reaching up to 40%, and the gain under the Bloom 176B benchmark is as high as 60%.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20231207/1701912154123387.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Figure 1.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20231207/1701912154123387.png"/>
With the increasing importance of generative artificial intelligence (generative AI) in various industries worldwide, and the trend of global enterprises investing in AI technology, investors have high expectations for the technology industry, especially for chip companies. After all, all AI technologies rely on computing power, which is based on AI chips as the underlying hardware. It is precisely under the booming demand for AI chips that TSMC (TSM.US) achieved a historically high level of total revenue in the fourth quarter of 2023, which is basically on par with the same period last year and significantly exceeded market expectations.
According to the latest forecast from market research firm Gartner, the AI chip market is expected to grow by 25.6% compared to the previous year, reaching $67.1 billion by 2024. It is projected that by 2027, the AI chip market will be more than twice the size of 2023, reaching $119.4 billion.
However, AMD, Nvidia's strongest competitor, has even more optimistic expectations for the future AI chip market. At the &#34;Advancing AI&#34; conference, AMD, Nvidia's strongest competitor, suddenly raised its global AI chip market size forecast for 2027 from the previous estimate of $150 billion to $400 billion, while the market size forecast for 2023 is only around $30 billion.
With the successive emergence of generative AI applications such as ChatGPT and Google's Bard, which are consumer-oriented, and the trend of more and more technology companies participating in the layout of AI technology, it may drive a decade-long era of AI prosperity. According to a recent report by Bloomberg industry research analyst Mandeep Singh, it is estimated that by 2032, the total revenue of the generative AI market, including AI chips required for training AI systems and AI software and hardware applications, will increase from $40 billion last year to $13 trillion. This market is expected to grow 32 times in 10 years, with a compound growth rate of up to 42%.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20231207/1701931024839388.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="图 3.jpg" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20231207/1701931024839388.jpg"/>
<h2>Programmable field seems to be AMD's &#34;biggest weakness&#34;</h2>
The market for programmable chips has been struggling to expand in the past few quarters, mainly due to chip oversupply in industries such as automotive and industrial, and continued weak demand from end users. The advantage of programmable chips lies in their programmable customization to perform various functions.
The latest financial report data shows that AMD's revenue from embedded programmable chip business in the fourth quarter dropped significantly by about 24%, to $1.1 billion.
One of AMD's competitors in the programmable chip market, Intel (INTC.US), also pointed out during the conference call after the release of its financial report that inventory correction will occur in various industries for programmable chips. Intel expects the correction to continue into the first half of the year.
AMD's gaming business also shrank by 17% to $1.4 billion. After experiencing a low demand for PC chips following the COVID-19 pandemic, AMD is starting to see signs of a return to the seasonal inventory purchasing pattern that used to be the norm.
Lisa Su stated that she expects the PC chip market to grow &#34;moderately&#34; and there will be more upside in the second half of the year as demand for personal computers with built-in artificial intelligence capabilities is expected to grow rapidly. According to research firm Canalys' forecast data, after experiencing weak demand in 2023, global PC shipments are expected to grow by about 5% in 2024.

AMD has announced its revenue forecast for 2024 for its newly launched artificial intelligence chip, the Instinct MI300 series, which has been raised to $3.5 billion. However, Wall Street analysts believe that this forecast is far from sufficient and have provided higher predictions. In addition, AMD's revenue forecast for the first quarter is lower than Wall Street's expectations. Although AMD's performance in the fourth quarter was mediocre, operating profit and profit margin declined. These news are all related to the company's business and financial information.

The "disappointing" performance of AI chips! Wall Street demands more from AMD's expectations