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(Bloomberg) -- Advanced Micro Devices Inc. tumbled in late trading after giving a disappointing outlook for its data center business, an area where it’s struggling to catch up with AI computing leader Nvidia Corp.
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The division will grow by a percentage in the “strong” double digits this year, AMD said on a conference call with analysts, predicting that the second half would be better than the first. But in an industry that’s seen Nvidia’s sales double during each of the past two years, that wasn’t enough to impress investors.
Shares of the chipmaker slid more than 8% in extended trading after the report was released. The stock had already dropped 1.1% this year through Tuesday’s close.
Though AMD’s fourth-quarter overall revenue topped estimates — and it provided an solid forecast for the current period — the data center numbers overshadowed the other results.
The report renewed concern that AMD’s push into AI equipment has lost some momentum — confirming the fears of analysts and investors. That sentiment was stoked in recent weeks by the arrival of a Chinese startup with a cheaper approach.
Revenue in the data center division was $3.86 billion during the fourth quarter. That jumped 69% from a year earlier, but analysts had projected $4.09 billion. On average, analysts are predicting that the unit will generate $18.4 billion in 2025. That would be growth of 46% from 2024.
Though AMD won market share from Intel Corp. in personal computers and servers last quarter, that area is less of a growth driver. PC chips brought in $2.3 billion in revenue last quarter, topping the $1.99 billion estimate.
AMD is trying to persuade some of the biggest companies in the world to include its AI products in their data center expansion plans. It’s still playing catch-up with Nvidia in this endeavor. Though AMD now generates more than $5 billion in annual revenue from the accelerator chips that help develop AI models, Nvidia’s sales in this category exceed $100 billion a year.
AMD’s total fourth-quarter revenue rose 24% to $7.66 billion, topping the $7.54 billion estimate. Earnings per share amounted to $1.09, minus certain items, in line with predictions.
Total sales will be $6.8 billion to $7.4 billion in the current quarter, AMD said. Analysts estimated $7.04 billion on average.