--- title: "AMD's AI Ambitions Stalled by Production Capacity" type: "News" locale: "en" url: "https://longbridge.com/en/news/294937048.md" description: "AMD's Q2 revenue and guidance both exceeded expectations, with data center revenue surging 107%, but Wall Street's divergence has shifted to whether supply can keep up. While MI450 shipments and Venice CPU stockpiling are strong, supply bottlenecks such as advanced packaging (CoWoS), gross margin dilution, and mass production execution risks have divided institutional opinions. Goldman Sachs raises its target to $640, while JPMorgan and HSBC set targets at $550 and $500, respectively" datetime: "2026-08-05T07:55:50.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294937048.md) - [en](https://longbridge.com/en/news/294937048.md) - [zh-HK](https://longbridge.com/zh-HK/news/294937048.md) generator: "portal-rs" --- # AMD's AI Ambitions Stalled by Production Capacity AMD delivered a quarterly performance that beat expectations and provided strong forward guidance, **but Wall Street's divergence is shifting from "whether demand exists" to "whether supply can keep up"**—this shift in narrative focus marks a new phase in AMD's AI investment story. In Q2 2026, AMD's revenue reached $11.54 billion, a 50% year-over-year increase, surpassing the market consensus expectation of $11.31 billion. The Data Center segment became the core driver with a 107% year-over-year growth rate, with GPU revenue estimated at approximately $2.8 billion (according to JPMorgan). Management subsequently made its most explicit quantitative commitment to date for 2027: total data center revenue is expected to more than double year-over-year, and server CPU revenue growth will exceed 70%—a statement that clearly exceeds the expectation framework of the previous few months. However, the strong performance and optimistic outlook have not led to a market consensus. According to Zhuifeng Trading Desk, research reports from JPMorgan, Goldman Sachs, and HSBC all show that **management's 2027 guidance is above sell-side expectations but fails to cover the most aggressive scenario assumptions on the buy-side. In particular, the mild gross margin guidance and execution risks associated with MI450 mass production constitute the main sources of short-term uncertainty.** At the current share price level of $518.58, major banks' ratings on AMD have diverged significantly: Goldman Sachs maintains a Buy rating with a target price of $640; JPMorgan and HSBC remain unchanged with Neutral and Hold ratings, and target prices of $550 and $500, respectively. ## MI450 Rack-Scale Products Begin Shipping, Execution Risks Cannot Be Ignored AMD's flagship AI product, Helios/MI450, began initial shipments at the end of Q3, is expected to enter a larger-scale mass production ramp-up phase in Q4, and will further accelerate in the first half of 2027. Management stated that customer pull-in progress is "ahead of initial forecasts," and the partner list has extended beyond the three core anchor customers—OpenAI, Meta, and Anthropic—with customer engagement for MI500 also fully underway. However, multiple institutions remain cautious about the mass production execution of this first rack-scale product. **JPMorgan pointed out that the gross margin dilution effect brought by the MI450 portfolio will gradually manifest from Q4 through the first half of 2027 as shipments increase.** The bank also noted that the dilution mechanism from OpenAI and Meta warrants will begin to layer in the second half of 2027 and needs to be continuously tracked in forecasting models. Regarding factors balancing profit margins, the positive contribution from server CPUs and the return of the embedded business to double-digit year-over-year growth (for the first time in nearly three years) will to some extent offset the gross margin pressure from the GPU portfolio. The gross margin guidance for Q3 is approximately 56%, slightly below the sell-side expectation of 56.2%. Management also holds a cautious view of the PC market in Q4, with gaming business revenue expected to remain under pressure throughout 2026 and 2027. ## Supply-Side Constraints Become the Biggest Variable, AMD Increases Investment in Equipment Hosting Against the backdrop of continuously improving demand visibility, supply-side constraints are becoming the core variable determining whether AMD can deliver on its guidance. Capital expenditure in Q2 jumped significantly to $808 million, far higher than $389 million in Q1. Management explicitly stated that the incremental capital expenditure is specifically used to host CoWoS advanced packaging equipment with outsourced semiconductor assembly and test (OSAT) suppliers to ensure mass production capacity for Venice CPUs. HSBC's research report conducted an in-depth scenario analysis on this and clearly pointed out that supply-side capabilities are currently the primary catalyst for valuation upsides and downsides. **HSBC estimates that to achieve management's goals of over 70% growth in server CPUs and a doubling of overall data center revenue by 2027, CoWoS-L capacity demand will be 35% and 12% higher than the base case scenario, respectively.** Since AMD has chosen to host equipment with second-tier packaging firms like SPIL and PTI, rather than first-tier suppliers like TSMC, HSBC believes this means there is almost no room for capacity breakthroughs among first-tier suppliers before 2027, while output risks due to low yields cannot be ignored. The bank also summarized the monitoring focus for upside and downside risks into three items: advanced packaging capacity, HBM memory supply, and substrate supply. JPMorgan also noted the signal of soaring capital expenditure in Q2, believing it clearly points to capacity stockpiling actions required for the Venice mass production ramp-up. ## Wall Street Divergence Intensifies, Valuation Fully Prices in Multi-Year Opportunities Following this earnings release, the ratings and target price trajectories of the three major institutions were vastly different, reflecting the market's tug-of-war between "growth expectations" and "execution risks." **JPMorgan raised its target price from the previous $385 (corresponding to December 2026) to $550 (corresponding to December 2027),** using a valuation method of 32 times P/E ratio multiplied by the annualized EPS of $17.20 for the second half of 2027, while maintaining a Neutral rating. The bank lowered its 2026 EPS expectation by about 6% to $7.25, while establishing a full-year 2027 forecast of $14.38, and pointed out that "the stock price has largely reflected multi-year opportunities," with execution risks for the first rack-scale product mass production remaining significant throughout the 2027 fiscal year. **Goldman Sachs maintains a Buy rating with a target price of $640,** based on applying a 32 times P/E ratio to AMD's "normalized" EPS of $20. The bank raised its EPS forecasts for 2026 to 2028 by an average of about 13%, believing that AMD fully possesses the conditions to achieve data center revenue exceeding $40 billion in 2027, and views the strong growth in server CPUs as an effective buffer against gross margin pressure during the GPU product mass production period. **HSBC maintains a Hold rating and a $500 target price,** based on 36 times P/E ratio multiplied by the expected 2027 EPS of $13.78, believing that the current share price includes about 4% downside space, and supply-side capabilities will dominate the direction of valuation upsides and downsides. On the financial front, JPMorgan predicts AMD's 2026 revenue will reach $50.5 billion, expanding further to $84 billion in 2027, a year-over-year growth rate of about 66%; expected EPS are $7.25 and $14.38, respectively; and non-GAAP operating margin is expected to rise from about 28% in 2026 to about 35% in 2027. 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