Advanced Micro Devices (NASDAQ:AMD) recently released its Q4 earnings report, and despite surpassing earnings expectations, the stock took a hit, dropping over 5% in after-hours trading. Investors’ cautious reaction was driven by several key factors that raised concerns about the company’s short-term and long-term prospects.
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The Fear Factor
First off, while AMD’s (AMD) earnings and revenue exceeded Wall Street forecasts, a significant shift in its guidance caused alarm. The company announced it would no longer provide specific revenue forecasts for its AI chips, opting instead for segment-level guidance. This decision immediately unsettled investors, especially given the growing importance of AI in the semiconductor industry. The lack of clarity around AI chip revenue left many questioning AMD’s ability to capitalize on the booming AI market in the near term.
Additionally, AMD’s data center business, which posted a solid 69% year-over-year increase, still fell short of revenue expectations, bringing in $3.9 billion. CEO Lisa Su’s forecast of a 7% sequential decline in data center sales for Q1 2025 further dampened investor sentiment. Concerns that AMD’s data center growth might slow, combined with its unclear outlook for AI revenue, amplified doubts about its ability to maintain its momentum.
Nevertheless, AMD’s short-term prospects appear uncertain. The decline in consumer PC demand and the underwhelming AI revenue forecast could signal turbulence in the company’s traditionally strong segments. In the long run, while AMD heavily invests in AI and data center advancements, these areas may take time to generate the robust returns investors hope for. The company’s future success hinges on its ability to navigate these challenges and deliver on its AI and data center investments.
Is AMD a Buy or a Sell?
Turning to Wall Street, AMD is considered a Moderate Buy. The average price target for AMD stock is $157.09, implying a 31.46% upside potential.
