Advanced Micro Devices (AMD) faces heightened investor scrutiny over its artificial intelligence (AI) strategy as Big Tech firms increasingly develop custom silicon, potentially limiting AMD’s role in AI infrastructure. The company is set to report its fourth-quarter earnings on Tuesday, with analysts forecasting a 22% revenue surge to $7.53 billion. However, competition from Nvidia and the growing adoption of proprietary chips by Microsoft, Amazon, and Meta have raised concerns about AMD’s long-term AI growth prospects.
Tech giants are ramping up investments in in-house AI chip development, benefiting companies like Broadcom and Marvell Technology, which provide hyperscalers with custom AI processors. Broadcom expects AI to represent a $90 billion revenue opportunity by 2027, a factor that helped its stock more than double last year. Marvell saw an 83% rise, while AMD’s stock fell 18% in 2024.
Despite this shift, AMD’s AI processor sales are expected to reach up to $10 billion in 2024, double its initial forecast of $5 billion. Its data center chip segment, projected to grow 82% to $4.15 billion in Q4, is expected to drive over half of total revenue. Meanwhile, its personal computer division is forecasted to rise 33% to $1.94 billion, as AMD continues to gain market share from Intel.
Supply chain constraints remain a challenge, with TSMC working to expand production capacity for AI chip packaging. However, Nvidia’s ramp-up of its latest “Blackwell” AI chips could limit AMD’s ability to secure additional manufacturing resources.
Despite these hurdles, AMD’s fourth-quarter net income is set to rise by more than 61% to $1.08 billion, reflecting strong demand for its products.