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AMD’s AI Strategy Faces Investor Scrutiny Amid Shift to Custom Chips

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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.

 

Microsoft Shares Drop as Cloud Outlook Disappoints, Meta Gains on AI Optimism

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Microsoft saw its shares tumble 6% on Thursday after its artificial intelligence (AI) investments failed to significantly boost cloud revenue. Meanwhile, Meta’s stock rose 4% as CEO Mark Zuckerberg reassured investors of strong growth potential, calling 2024 a “really big year.”

Both tech giants defended their heavy AI spending following concerns sparked by Chinese AI startup DeepSeek’s recent advancements in low-cost AI models. However, while Meta continues to show strong ad revenue growth—justifying its AI investments, according to Evercore analyst Mark Mahaney—Microsoft’s Azure cloud platform has struggled.

Microsoft missed market estimates for Azure’s quarterly revenue growth and provided a third-quarter forecast below expectations. The company had previously promised a second-half rebound, but analysts now express skepticism.

“The second-half re-acceleration story for Azure is not playing out,” said Barclays analyst Raimo Lenschow, adding that Microsoft prioritized AI workloads over core Azure functions, delaying the expected growth recovery.

For Meta, a stronger-than-expected 21% revenue increase eased investor concerns about Zuckerberg’s aggressive AI spending plans, which could reach $65 billion this year. Analysts remain bullish, with Barton Crockett of Rosenblatt stating that “Meta might have more benefits to show from AI than anyone.”

At least 15 brokerages raised their price targets on Meta, which saw a 65% stock gain in 2023, the largest among Big Tech firms. The stock’s rally was set to add over $80 billion to its market value.

Conversely, Microsoft was on track to lose about $182 billion in market capitalization. J.P. Morgan analyst Mark Murphy noted that Microsoft “did not recommit to its Azure second-half outlook the same way it did 90 days ago,” weakening confidence in the company’s cloud growth trajectory.

 

EU Set to Reevaluate Tech Investigations into Apple, Google, Meta

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The European Commission is currently reassessing its ongoing investigations into major tech companies, including Apple, Meta, and Google’s parent company Alphabet, according to a report by the Financial Times. This reevaluation could result in significant changes to the scope of these probes, with potential reductions or adjustments to the focus of the investigations. The review will encompass all cases initiated since the implementation of the European Union’s Digital Markets Act (DMA) in March 2024, a move that underscores the EU’s commitment to regulating the power of large tech platforms.

The DMA is one of the EU’s most stringent regulatory measures aimed at curbing the market dominance of tech giants. It outlines a set of rules that govern what these companies can and cannot do, with a particular emphasis on promoting fair competition and protecting consumers. The legislation carries the threat of hefty fines—up to 10 percent of a company’s annual revenue—for violations, making it one of the most impactful tools in Europe’s regulatory arsenal.

During the reassessment process, all decisions regarding fines or penalties will be temporarily suspended, but technical work on the ongoing investigations will continue, ensuring that the EU remains proactive in addressing potential issues. This pause in decision-making reflects the commission’s careful approach to fine-tuning its regulatory efforts and ensuring that the final outcomes are well-founded and justified.

The reassessment of these high-profile investigations into Apple, Meta, and Google is likely to have significant implications for the future of tech regulation in Europe. With the DMA already a landmark piece of legislation, the outcomes of these reviews could set important precedents for how similar cases are handled in the future, both within the EU and globally. As these probes unfold, all eyes will be on how the EU strikes a balance between promoting innovation and ensuring fair competition in the rapidly evolving tech landscape.