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AMD Shares Drop as CEO Forecasts Declining Data Center Sales Amid AI Competition

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Shares of Advanced Micro Devices (AMD) plunged around 10% in after-hours trading on Tuesday after the chipmaker provided a disappointing forecast for its data center sales, particularly in the AI market. Despite exceeding quarterly revenue expectations, AMD’s outlook for 2024 failed to reassure investors, who have been anticipating the company’s larger push into AI, an area dominated by Nvidia.

AMD reported fourth-quarter data center revenue of $3.9 billion, missing the analyst consensus estimate of $4.15 billion. This segment is considered a key indicator of AMD’s AI revenue, as it includes sales of processors that compete with Nvidia’s chips. For 2024, the company reported generating over $5 billion in AI chip revenue but projected a 7% decline in data center sales for the current quarter. AMD’s CEO, Lisa Su, did not provide specific projections for AI chip sales but expressed confidence in achieving “tens of billions” in revenue over the coming years.

However, analysts, such as Kinngai Chan from Summit Insight, suggested that AMD’s AI GPU performance was not meeting market expectations. Meanwhile, Nvidia continues to lead the AI chip market with an 80% share, bolstered by its proprietary CUDA software, which remains a significant barrier for AMD to overcome. Competitors like Microsoft and Meta have also been developing their own custom AI chips, further intensifying the competitive landscape.

Despite these challenges, AMD is focusing on collaborations with its customers to create custom AI chips, aiming to close the gap with companies like Marvell and Broadcom. AMD remains optimistic about increasing sales of personal computer chips, as demand for PCs capable of handling generative AI tasks shows signs of recovery after a prolonged slump.

AMD’s forecasted first-quarter revenue of approximately $7.1 billion, slightly above analyst estimates, provided some relief, but the company’s position in the highly competitive AI chip market remains a point of concern for investors.

 

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.

 

Apple Partners with Broadcom to Create Its First AI Server Chip, Report Says

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Apple Collaborates with Broadcom on AI Server Chip Development
Apple is reportedly working with semiconductor manufacturer Broadcom to develop a specialized server chip aimed at powering artificial intelligence (AI) features. The move aligns with Apple’s growing emphasis on AI-driven capabilities across its product ecosystem. While the company has previously announced plans to offload some processing for Apple Intelligence features to the cloud, this marks the first instance of Apple creating a dedicated server chip for AI applications. Recent updates to iOS, iPadOS, and macOS have already introduced advanced Apple Intelligence features, including integration of tools like ChatGPT with Siri.

Codenamed ‘Baltra’: Apple’s AI Server Chip in the Works
According to a report from The Information, which cites sources familiar with Apple’s plans, the new server chip, internally referred to as “Baltra,” is designed specifically for AI processing tasks. Unlike Apple’s existing processors, which primarily power on-device AI functionalities in iPhones, iPads, and Macs, the Baltra chip will handle AI tasks in the cloud. This could pave the way for more powerful and complex AI-driven features that require robust server-side computation.

Collaborative Effort Focused on Networking Technology
The partnership with Broadcom extends to the development of networking technology essential for the Baltra chip’s functionality. By optimizing the chip for cloud-based AI workloads, Apple aims to deliver faster and more efficient responses to user requests. This could include tasks like natural language processing, enhanced Siri capabilities, and improved integration with AI models, ensuring seamless performance across Apple devices.

A Strategic Step Toward AI Leadership
Developing an AI server chip represents a significant step in Apple’s strategy to remain competitive in the AI space. As rivals like Google and Microsoft advance their AI infrastructures, Apple’s investment in custom server chips highlights its commitment to innovation. The introduction of Baltra not only strengthens Apple’s control over its technology stack but also opens the door for new AI-powered experiences tailored to its ecosystem, reinforcing its position as a leader in consumer technology.