:max_bytes(150000):strip_icc()/GettyImages-2254254955-fd860d895c1b4c4880aca1790742c8ae.jpg "AMD’s Stock Takes a Hit Despite Solid Earnings. What Happened?")
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Key Takeaways
- AMD shares sank sharply Wednesday, despite fourth-quarter earnings that topped Wall Street’s estimates.
- Analysts said a surprise sales boost from China that may have smoothed over softer growth in other areas and high investor expectations heading into the report likely weighed on the stock.
Advanced Micro Devices (AMD) investors are becoming harder to impress.
Shares of the chipmaker sank over 13% in early trading Wednesday, despite fourth-quarter results that topped Wall Street’s estimates. Record revenue of $10.27 billion and adjusted earnings per share of $1.53 each came in better than expected.
However, a surprise boost from sales of AMD’s MI308 chip to customers in China may have raised concerns about “more muted growth” across the rest of the company’s AI sales, Wedbush analysts said following the results. The analysts also warned AMD could still face a number of challenges to securing more sales in China amid shifting export restrictions of advanced chips.
Why This Matters to Investors
Results from AI-related companies have been under the microscope this earnings season amid concerns about spending in the sector, and fears that the rally of the last few years has left some in the AI trade overvalued, even as demand looks strong for chipmakers such as AMD and analysts remain bullish.
Morgan Stanley analysts said they were surprised by the market’s reaction, expecting the quarter’s results would have been solid enough to drive the stock higher. Some investors may also be waiting to see more signs of success from AMD’s latest products, which could remain “something of a show-me story,” they said.
With Wednesday’s drop, AMD shares have given up their gains for the year, but are still up about 90% in the last 12 months, thanks to gains driven by strong sales and new partnerships.
