AMD shares rise as chip demand from data centers cushions PC slowdown

Chipmaker Advanced Micro Devices Inc (AMD.O) snatched more market share in the lucrative data center business from rival Intel Corp (INTC.O) in the third quarter, drawing praise from Wall Street analysts on Wednesday.

Its shares surged more than 3% in early trading as growth in demand for chips used in server processors helped AMD cushion a slump in the personal computer market, which makes up nearly a third of its revenue.

“(AMD) is delivering on their datacenter story, and Intel’s rolling collapse has removed some of the constraints on the narrative,” Bernstein analyst Stacy Rasgon wrote in a note.

AMD forecast a 14% rise in fourth-quarter sales, which although below market expectations, was in sharp contrast to an expected sales decline at Intel and Nvidia Corp (NVDA.O).

“We expect AMD’s share gains to continue, as the company’s upcoming, next-generation server CPUs are expected to outperform Intel’s lineup across price/performance metrics,” YipitData analyst Nathaniel Harmon said.

However, growth in the data center business too is slowing as its clients Alphabet Inc (GOOGL.O) and Microsoft (MSFT.O) have warned of a moderation in demand for cloud and data centers due to rising inflation.

Also, a recovery in the PC business seems distant, with Chief Executive Lisa Su saying that AMD expects the market will decline by another 10% in 2023.

Even in a weak PC market, some analysts said, AMD was under-shipping chips to clear up the supply chain and this could result in revenue gain next year.

“The team is significantly under-shipping to PC consumption to help flush channel inventories, which should help client revenues to start to inflect to the upside,” according to J.P. Morgan analysts.

AMD’s shares were trading at $61.58. They have lost more than half of their market value so far this year.