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Semiconductor manufacturer Advanced Micro Devices (AMD) pulled off an earnings ($0.96 per share vs. estimates of $0.94) and revenue ($7.44 billion vs. estimates of $7.12 billion) beat in its first quarter. Despite all this, the chip company is expecting a $1.5 billion hit to its annual revenue tied to US curbs on chip exports to China.
Stifel applied technology analyst Ruben Roy comes on Wealth to talk about AMD's revenue forecast and what China still represents to the AI chip industry amid trade tensions.
Also catch Synovus Trust senior portfolio manager Daniel Morgan's commentary on AMD's earnings print.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
AMD shares pushing higher after the company offered an upbeat outlook for the most part. However, the company did warn that US curbs on chip exports to China will mean a 1 and a half billion dollar revenue hit. Joining us now to break it all down, we've got Ruben Roy, Stifel's applied technology analyst, who has a buy rating on AMD and 132 price target. Ruben, always a pleasure to grab some time with you here, and and it seemed like yesterday there was a lot more of the the pushback from some investors, at least early on about what this would potentially mean in that hit in China, but AMD, I mean, do they have any answer for what's going on in China? Do they have a China problem?
Uh, they talked about an 800 million dollar write-off. We had written about this a few weeks ago and obviously Nvidia is going through, uh, you know, at a larger scale, the same issue with export restrictions on even a, I would say a lower, you know, class of chips, uh, class of AI chips going into China. And who knows where that's going to stop, right? So does that, uh, the question would be, does that eventually impact things like PC chips and, you know, other other devices that AMD is shipping to China, unknown. But for now, what we do know is despite the one and a half billion dollar hit that AMD is taking on revenues for this year, the overall data center commentary and, um, you know, back half outlook were actually pretty good. Uh, I think, you know, going into the quarter, there was a lot of debate around AMD's positioning in AI relative to Nvidia at the high end, uh, on the GPU side, and then some of the custom chips that, uh, AMD's customers are coming out with. Yeah. And I think, you know, to a certain extent that the company dispelled some of those fears. So I think it's a little bit better than, uh, you know, I think the debate going into the into the print.
So upbeat forecast, shares rise. Then on the call, they talk about tariffs, expecting a one and a half billion dollar hit due to chip curbs. Where do you net out then?
Well, net out is, look, there's going to be tariffs. There's going to be export restrictions and like I said, despite that, our numbers actually went up a little bit. I think consensus numbers didn't change much in terms of expectations. And so, you know, the client side of AMD's business did quite a bit better I think than investors were thinking going into the print. And then gaming, of course, did better. Now, those are important segments, but the investor focus is certainly going to be on AI. And on that front, AMD has an investor event coming up in early June and we're going to hear more about the product roadmap. You know, for now, our belief is that while China's important, export restrictions are something to keep an eye on, the overall structure of data center spend in the US and and even beyond the US, it remains strong. A lot of the hyperscalers have already reported earnings and either maintained or even took up their capex budgets for this year. And I think that's a good setup for a lot of these AI component providers.
Yeah, and of course, an interesting setup for the likes of Nvidia, which we are still set to hear from. Ruben, thank you so much for your time this morning. Appreciate it.
Thank you.
