Advanced Micro Devices (AMD) is a leading player in the semiconductor industry and is expected to release its earnings report after the US markets close on 2 August (APAC time). Known for its high-quality computer processors and semiconductor technology, AMD shares are up almost 67% year-to-date. This is likely due to the recent interest in generative artificial intelligence (AI) that's caused a massive pivot in market sentiment. As Wall Street seeks to reap the full benefits of AI-based productivity, best AI stocks like Tesla (NASDAQ: TSLA) and Alphabet (NASDAQ: GOOGL) are seeing major increases in their valuations. With Nvidia (NASDAQ: NVDA) and AMD both being fabless chip makers, investors may be wondering if AMD can replicate the success of their rival given the parabolic run that Nvidia has been recently enjoying. In this AMD earnings forecast and preview article, we'll explore AMD's business focus and how AMD shares might perform in comparison to its previous quarter's earnings report.
AMD Earnings Q1 Review
Unlike Nvidia, AMD did not experience the same melt-up effect on the market with its Q1 earnings report. Despite surpassing earnings expectations and delivering earnings per share of 0.60 (6.54% beat) and revenue of US$5.353B (0.91% beat), AMD shares sank more than 9% the following day. This was due to declining PC chip sales, which was reportedly 65% down compared to Q1 results from 2022. Since then, AMD shares have managed to recover from the hype of AI. Recently, its shares peaked at US$132.83 on the news that AMD was designing a new AI-specific chip to challenge Nvidia's dominance in the space. Based on all these innovative developments, investors and traders focused on the latest trends might have high expectations of what CEO Lisa Su might have in store going into AMD's upcoming earnings report.
What Is AMD's Business Focus?
AMD's business strategy primarily focuses on high-performance computing and graphics. The company designs and integrates technology that powers millions of intelligent devices, including personal computers, game consoles, and cloud servers that define the new era of surround computing. While AMD is mostly known for its robust computer processors, the company is also focusing on its data centre solutions and semi-custom products. This includes the sales of microprocessors and chipsets found in desktop and notebook PCs, as well as revenues from graphics, professional graphics and datacentre GPUs, and development services. The company's strong commitment to technological innovation, as evidenced by its continued R&D investments and the recent announcement of AI-specific chip development, indicates its strategic approach to securing a competitive edge in the booming AI and computing markets.
Additionally, Its portfolio includes a range of GPUs, CPUs, and APUs designed for gaming and business use. For instance, AMD's Radeon Pro series of graphics cards are tailored specifically for creative professionals such as 3D animators and video game designers. Moreover, their semi-custom products have been used in the Sony PlayStation 5 and Xbox Series X gaming consoles. With such a strong focus on consumer-based products, AMD has developed a huge following as gamers are typically split between team red and team blue, which represents Intel (NASDAQ: INTC).
On the enterprise side of things, AMD's EPYC server processor line is increasingly becoming popular among cloud service providers such as Microsoft Azure and Google Cloud. The EPYC series is also being adopted by other leading companies that are looking to increase their computing power and reduce costs. With such a wide array of products already on the market, it's not hard to see why AMD shares have rallied so much on a year-to-date basis.
AMD's Venture into Artificial Intelligence
AMD has been making strides in the realm of artificial intelligence (AI), steering its business strategy towards the rapidly evolving AI market. The company's recent advancements in GPU technology are targeted specifically at AI workloads, placing them on a competitive footing with other tech giants like Nvidia. The unveiling of their AI-specific chip, designed to challenge Nvidia's dominance, signifies AMD's commitment to becoming a key player within the AI industry.
The company's focus on AI underlines the importance of these technologies in future industry trends, including machine learning and autonomous systems. This venture also aims to capitalize on the burgeoning demand from businesses for intelligent, real-time analytics and decision-making capabilities. By integrating AI with their current offerings, AMD is poised to provide comprehensive solutions that cater to a variety of sectors, from gaming to enterprise-level applications.
AMD's strategic emphasis on AI is further evidence of its innovative vision and desire to remain on the cutting edge of technology and stay on par with its competitors. The upcoming earnings report should provide further insights into the progress and impact of these initiatives on AMD's business model and overall performance. Investors will be keeping a keen eye on how their AI ventures influence the company's revenue and stock earnings.
AMD Earnings Forecast & Expectations
Analysts forecast that AMD will report earnings per share of US$0.574 and revenue of US$5.319B for Q2. This is on par with last quarter's earnings expectations for AMD and a steep decline from last year's Q2 expectations. As AMD continues to navigate the tech sector's shift towards AI, its revenue could take a hit if its venture into AI does not provide the expected return on investment. However, most analysts are remaining hopeful and bullish about AMD's updates and developments in the AI space so we might see huge upcoming volatility if they deliver on this front.
AMD Stock Technical AnalysisSource: TradingView as of 28 July 2023
Since the generative AI-related news and announcements, AMD share prices have traded within a range, between US$110 and US$122.80. It has recently bounced off the bottom end of the channel and looks to trend upwards ahead of AMD's upcoming earnings report. This may be seen as a sign of strength for AMD stock as investors might be buying up shares on the rumours of potential innovations in the AI sector.
Bullish AMD stock traders might be looking for positive momentum from AMD's strong earnings report and growth numbers. This might cause AMD shares to surge past US$122.80 and head towards the US$130 range, which doubles as a possible supply zone where there may be extensive selloffs and profit-taking.
On the other end of the argument, bearish AMD share traders may be looking out for a disappointing earnings report from AMD that lacks development in the AI space. This could provide enough downward momentum to cause AMZN shares to retest the US$110 support line and result in a break through.
As AMD continues to evolve and recover from its gaming slump, understanding its financial outlook becomes increasingly important for investors and traders alike. From analysing the previous quarterly performance of AMD stock to comprehending the full extent of how AMD generates revenue, we hope our AMD earnings forecast and preview have provided invaluable insights into the performance and growth prospects of this semiconductor giant.
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