Yesterday, February 4, after the close of trading Advanced Micro Devices (AMD) reported record revenue growth for the fourth quarter. The chipmaker even reported growth in market share at the expense of rival Intel (INTC).
Yet in after-hours reading the stock dropped 8.80%. Today’s regular session confirmed the tumble with a 6.27% tumble.
The problem for AMD, revenue growth in the company’s data center unit, which competes in the market for AI chips with Nvidia (NVDA) revenue slowed.
The problem for the tech sector as a whole, and especially AI stocks, is that the dip in the growth rate for data center revenue was to a “disappointing” 69% rate. That’s only disappointing in comparison to the a year-over-year growth rate of of 122% that the company reported for the third quarter of 2024.
This raises the important question for AI and tech stocks: Are current valuations for the stocks predicated on unachievable exceptions for extraordinarily high growth rates for unrealistically long time periods?
For the quarter ended December 31, AMD reported adjusted earnings per share of $1.09 which was in line with the consensus estimate. Fourth quarter revenue was a record $7.7 billion, which was nearly $200 million more than the estimate.
Looking ahead to the current quarter, AMD expects revenue ranging from $6.8 billion to $7.4 billion. The midpoint of of $7.1 billion is above than the current analyst estimate of $7.04 billion.
“Data Center segment annual revenue nearly doubled as EPYC processor adoption accelerated, and we delivered more than $5B of AMD Instinct accelerator revenue,” said AMD CEO Lisa Lu. “Looking into 2025, we see clear opportunities for continued growth based on the strength of our product portfolio and growing demand for high-performance and adaptive computing.”
“While Data Center revenue was up 69% year-over-year in Q4, the relatively small $3.9B revenue number split between Instinct and EPYC CPUs isn’t doing bullish sentiment any favors,” said Joe Albano, Seeking Alpha Investing Group Leader for Tech Cache. “AMD continues to show relatively weak sales versus Nvidia when it comes to AI accelerators.”
I’d note that no company grows revenue at a 122% rate for very long.
