Results for the fourth quarter of 2024
AMD posted earnings per share (EPS) of $1.09 on record revenue of $7.7 billion, slightly above the Wall Street consensus.* Data centers, as the largest division of the company, brought in net revenues of $3.9 billion, which represents a year-on-year increase of 69%. The client segment also recorded a 58% year-over-year increase, namely $2.3 billion in net revenue. The gaming segment also grew above expectations, reaching $563 million instead of the forecast of $487 million.
Forecast for the first quarter of 2025
A bigger surprise was the forecast for the first quarter of 2025. AMD expects revenue of about $7.1 billion, while Wall Street was counting on a value of $7.0 billion. This optimistic estimate should theoretically support the growth of stocks, but the market reaction indicates more concerns, probably related to macroeconomic factors and geopolitics. [1]
Impact of Chinese tariffs on the technology sector
Chinese tariffs are also a significant factor affecting the technology sector. President Trump has imposed a 10% tariff on goods made in China. While high-performance chips made in Taiwan will remain unaffected, products such as servers and PCs made in China may be affected. If the prices of these products rise, demand for them may weaken, which could also indirectly affect the demand for AMD processors. [2]
Competition in the AI chip market
In addition, there is competitive pressure. Nvidia is up 80%1 in the last 12 months, while AMD has lost 33%2.* Although Intel was even worse off with a 54%3 drop, it turns out that investor money is pouring mainly into Nvidia, which dominates the field of AI chips.* AMD is trying to get ahead in this area, but it will need a more aggressive strategy if it wants to compete effectively.
Investment view
So, what does this mean for us investors? AMD has a good foundation for long-term growth, especially if they manage to gain a better position in AI. However, short-term risks, such as geopolitics and an economic slowdown, can cause volatility. If I look at the long term, any decline in AMD shares can represent an investment opportunity. [3]
* Past performance is no guarantee of future results
[1], [2], [3] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
1Nvidia stock price performance over the past five years: https://tradingeconomics.com/nvda:us
2AMD stock price performance over the past five years: https://tradingeconomics.com/amd:us
3Intel stock price performance over the past five years: https://tradingeconomics.com/intc:us
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