AMD soars after data-centre chip sales fuel upbeat forecast

ADVANCED Micro Devices (AMD) gave a strong sales forecast for the current quarter, indicating that the chipmaker continues to make strides in its most lucrative market: data-centre processors.

AMD predicted second-quarter sales on Tuesday of roughly US$6.5 billion, compared with an average analyst estimate of US$6.03 billion. That helped the shares up as much as 8.3 per cent in late trading.

The outlook helped allay concerns that the chip market is slowing - and signalled that AMD is making further gains on Intel. The company, which for years lagged far behind Intel in computer processors, is on pace to end 2022 with almost 4 times as much revenue as in 2019. New products and better execution have helped AMD win over customers who were once sceptical about its capabilities.

AMD's outlook contrasts with a recent forecast from Intel, which was hurt by an accumulation of inventory at some of its PC customers. The return of Covid-related lockdowns in parts of China also has squeezed the supply of components needed to complete devices, Intel said. Other chipmakers, such as Texas Instruments, have said those disruptions are hurting growth as well.

AMD's forecast includes a boost from its acquisition of Xilinx, a deal it completed in the first quarter.

"Each of our businesses grew by a significant double-digit percentage year-over-year," AMD chief executive officer (CEO) Lisa Su said in a statement. Growth of the existing business and the Xilinx acquisition have both contributed to stronger full-year expectations, she said.

Despite AMD's rapid growth, investors have shunned the stock this year, part of a broader pullback for semiconductor shares. Investors have been particularly wary of chipmakers that made rapid gains over the past 3 years, fearing that a collapse is near. AMD closed at US$91.13 in New York Tuesday (May 3), down 37 per cent this year.

The latest forecast suggests that AMD still has momentum. Under Su, the company has developed leading-edge components and outsourced production - something her predecessors struggled to do. That's led more chip customers to ditch Intel in favour of AMD.

Intel CEO Pat Gelsinger, who took the helm last year, is plotting his own turnaround. He now claims that his company is offering better PC processors than AMD and will take back market share.

Unlike Intel, which manufactures its products in-house, AMD works with Taiwan Semiconductor Manufacturing (TSMC), giving it access to better technology. Using the latest manufacturing techniques can improve the way chips process data and how much information they store.

While TSMC has surpassed Intel in technological capabilities, it has struggled to meet demand for chips. But AMD has an edge over other TSMC customers. Its products are some of the most expensive items coming out of the Taiwanese factories, in theory making it better placed to get the supplies it needs.

AMD is also the second-largest maker of graphics chips used in add-on cards by PC gamers. It competes in that market with Nvidia and will face fresh opposition from Intel, which has begun offering products for that segment for the first time in years.

AMD, based in Santa Clara, California, supplies graphics chips used in Microsoft's Xbox and Sony's PlayStation.

AMD reported first-quarter earnings of US$1.13 a share, excluding some items, well ahead of the 92-US cent estimate. Sales rose 71 per cent to US$5.9 billion, topping projections of US$5.3 billion. The first quarter also included contributions from Xilinx.

The chipmaker is predicting annual revenue of US$26.3 billion for 2022, a gain of 60 per cent from the prior year. That compares with an average estimate of US$24.1 billion.

AMD is gaining ground at the largest buyers of computer processors, owners of the giant data centres that are the backbone of the internet. Some 48 per cent of all new processors installed in these data centres were bought from AMD in March, according to Jefferies & Co analyst Mark Lipacis. BLOOMBERG