AsianFin -- Advanced Micro Devices, Inc. (AMD) shares jumped 9% on Wednesday, leading the broader U.S. market index S&P 500 as Wall Street applauds the outlook of the chipmaker unveiled on its analyst day.
Credit：AMD
AMD at its Financial Analyst Day on Tuesday showcased its long-term strategy to lead the $1 trillion compute market and accelerate next phase of growth. At the event, AMD CEO Lisa Su said the company sees the datacenter total addressable market (TAM) reaching $1 trillion by 2030. That means AMD doubled its outlook for the datacenter TAM, including central processing units (CPUs), artificial intelligence (AI) chips and networking products.
“AMD is entering a new era of growth fueled by our leadership technology roadmaps and accelerating AI momentum,” said Su. “With the broadest portfolio of products and our deepening strategic partnerships, AMD is uniquely positioned to lead the next generation of high-performance and AI computing. We see a tremendous opportunity ahead to deliver sustainable, industry-leading growth. We have never been better positioned.”
AMD outlined its growth targets for the next three to five years. It projected total revenue growing at a more than 35% compound annual growth rate (CAGR), a non-GAAP operating margin greater than 35%, a gross margin to between 55% and 58%, and non-GAAP earnings per share (EPS) exceeding $20.
For the datacenter business, the main beneficiary of AI spending, AMD anticipated deliver a greater than 60% revenue CAGR. In data center AI, AMD aims to drive revenue CAGR of more than 80%, powered by strong customer momentum and next-generation AMD Instinct products and systems. Su said the company's data center business is on track to make tens of billions of dollars of revenue in 2027 and is expected to grab a “double-digit” share of the AI data center market within the next three to five years, directly challenging the market leader Nvidia Corp.
Su revealed that the firm is seeing strong momentum with multiple gigawatt-scale project opportunities for its MI450 series chips and Helios rack-scale offerings across hyperscalers, AI-native companies, and sovereign AI businesses. While AMD disclosed development of its next-generation MI500 series chips is underway,few details about their specifications ofr release timeline were provided.
In the server chip market, AMD is targeting its share of the market to pass 50%, up from about 40% currently, driven by its EPYC processos. For client chips, the company said it is aiming for more than 40% of the market.
Su dismissed concerns over Big Tech’s elevated spending during a CNBC interview on Wednesday, stating investing in more computing will accelerate the pace of innovation. “I don’t think it’s a big gamble,” she said. “I think it’s the right gamble.”
“Overall, we are very pleased with the presented roadmap, and are optimistic on the company’s outlook,” said Harsh Kumar, senior analyst at Piper Sandler, in a note to clients. Though While AMD didn't share as many incremental details on its AI GPU road map as some analysts were hoping, Jefferies's senior analyst Blayne Curtis said in a Tuesday note that "success of the business from here remains largely dependent on how the market receives MI400/MI500 series GPUs."
While AMD's expectations for its business are "mostly consistent" with what Wall Street already modeled for the near to medium term, according to Bernstein's senior analyst Stacy Rasgon, "the real story still hinges on the company's ability to leverage" its first rack-scale solution, Helios, into something that positions AMD as a larger and more formidable player in the AI market in the coming years.
AMD last week released stronger-than-anticipated top and bottom line for the third quarter, but its guidance failed to impress Wall Street.
Sales for the quarter ended in September rose 36% year-over-year (YoY) to $9.25 billion, beating analysts estimated $8.7 billion. EPS stood at $1.20, minus certain items, whereas analysts projected $1.17. AMD’s datacenter business generating $4.3 billion that quarter with a 22% YoY rise, compared with estimates of $4.14 billion. AMD saw revenue of roughly $9.6 billion for the fourth quarter. While analysts had predicted $9.2 billion on average, some projections ranged as high as $9.9 billion.
