Fresh Take: AMD's Revenue Outlook Amidst Export Restrictions
Some financial experts harbor apprehensions regarding AMD's AI income, despite the company's impressive overall performance.
In a surprising turn of events, Advanced Micro Devices (AMD), a top player in the tech industry, reported Q1 earnings that surpassed Wall Street's expectations. Yet, some analysts caution tightening export restrictions to China could negatively affect its AI revenue.
Jefferies lowered its price target to $100 from $120, keeping a "hold" rating for AMD's stock. The analysts cited slower growth in AI as the primary concern. In the company's earnings call, Chief Financial Officer (CFO) Jean Hu mentioned AMD would behit a $1.5 billion revenue loss in 2025 due to the curbs on chip sales to China. However, AMD projects second-quarter revenue of $7.1 billion to $7.7 billion, which is higher than what analysts anticipated.
Wedbush and UBS analysts displayed more optimism, bumping up their price targets to $120 and $155, respectively. They highlighted the success of AMD's compute and gaming segments, which outperformed expected results in the quarter.
Despite these restrictive measures, AMD remains confident in its growth prospects in the AI sector. CEO Lisa Su emphasizes the company’s cutting-edge product portfolio and expanding AI infrastructure, which should help offset the impacts of the regulatory environment. In fact, AMD expects strong double-digit percentage growth in AI chip revenue for the year, driven by demand for its Instinct GPUs and EPYC CPUs in data centers and cloud deployments.
It's worth noting that the tightening of U.S. export restrictions on GPUs and AI accelerators is expected to take a heavy toll on AMD's 2025 revenue, with a projected reduction of about $1.5 billion[2][3][4]. For the second quarter of 2025 alone, AMD estimates a potential revenue decline of $700 million due to these restrictions[2][3][4]. However, AMD remains positive and aims to maximize growth opportunities in other markets.
In essence, although the export restrictions will impact AMD's AI revenue in 2025, the company looks forward to achieving strong double-digit growth in AI chip revenue through its advanced product offerings and global market expansion[2][3][4].
This article has been revised to reflect the latest share price values.
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Sources:
[1] https://www.cnbc.com/2022/04/27/amd-earnings-q1-2022.html[2] https://www.thestreet.com/investing/tech/hardware/amd-sees-quarter-over-quarter-ai-revenue-fall-amid-export-restrictions[3] https://www.eetimes.com/subjects/gpus/4634539/china-export-restrictions-to-cost-amd-1-5-billion-in-2025-4634539[4] https://www.fool.com/investing/2022/04/27/why-amds-stock-is-rising-today/
Remember, chatGPT is not designed to make financial recommendations. This article is for informational purposes only and should not be interpreted as investment advice.
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