Advanced Micro Devices shares fell 5.27% ahead of Tuesday’s first-quarter earnings report. Investors expect results to show that the company is rapidly shifting toward more data center revenue, driven by higher AI infrastructure spending.
Analysts expect first-quarter revenue of $9.9 billion and adjusted earnings per share of $1.29, both about one-third higher than last year. Data center sales are forecast at $5.6 billion, up 53% year over year and accounting for 57% of total revenue. This segment, which was 43% two years ago, could reach nearly two-thirds of sales next year.
AMD’s growth reflects shifts in the AI chip market. NVIDIA’s GPU technology and software remain the industry standard for AI computing, with its data center revenue soaring from $15 billion before the AI boom to $194 billion last year. Still, tech companies seeking to diversify their supplier base have turned to AMD, the only other major GPU maker capable of handling enterprise AI workloads at scale.
AMD uses pricing to compete, lowering its data center operating margins to attract customers from Nvidia. For its two largest AI contracts, Meta Platforms and OpenAI, AMD has issued warrants totaling 320 million shares, vesting on delivery and performance. Shipments for both deals are expected to begin in the second half of the year, testing AMD’s capacity to ramp up production and meet the needs of demanding AI clients.
Beyond data centers, AMD’s PC, automotive, and industrial businesses are rebounding from recent lows. Combined first-quarter sales in these segments are expected to rise 13% from last year. This recovery positions AMD for what analysts expect to be a stronger second half of the year.
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