Advanced Micro Devices (AMD) shares climbed 4.2% to $355.92 on Tuesday, ahead of the company's first-quarter earnings report due after the market close. The results represent a pivotal moment for investors assessing whether the AI-driven rally in the chipmaker's stock has run its course.
The stock had briefly dipped on Monday following a downgrade from HSBC, which moved AMD from a 'buy' to a 'hold' rating. Analyst Frank Lee cited limited room for a positive earnings surprise, given elevated expectations for server CPUs and AI chips. The downgrade had initially pressured shares, but the broader market sentiment remained bullish heading into the report.
Wall Street's consensus, according to FactSet, calls for revenue of approximately $9.9 billion and adjusted earnings of $1.29 per share. Both figures represent roughly a one-third increase year-over-year. However, the most closely watched metric is data-center revenue, which is projected to surge 53% to $5.6 billion, underscoring the segment's critical role in driving AMD's AI narrative.
The debate among analysts is intense. Cantor Fitzgerald's C.J. Muse expects a 'strong beat,' forecasting first-quarter revenue of $10.4 billion, well above the consensus. Muse points to robust demand for servers and PCs, along with firmer CPU pricing. In contrast, HSBC's Lee sees limited upside, suggesting the stock's recent run-up already prices in strong results.
CNBC's Jim Cramer has pushed back on the bearish view, arguing that AMD's CPU business is gaining traction as 'agentic AI'—software that automates tasks with minimal human input—gains momentum in data centers. 'CPUs are what is being used by agents,' Cramer said, signaling potential for further gains. Meanwhile, Intel (INTC) posted strong gains during Tuesday's session, while Nvidia (NVDA) slipped slightly, highlighting the competitive dynamics in the chip space.
Competition remains fierce. Nvidia continues to dominate the GPU market, essential for AI training and inference. Intel's recent strength has led some investors to bet that AMD may benefit from rising CPU demand. Unlike Intel, which operates its own fabrication plants, AMD relies primarily on Taiwan Semiconductor Manufacturing Co. (TSM) for production, adding a supply-chain variable.
AMD's February guidance did little to calm investor nerves. The company projected first-quarter revenue of around $9.8 billion, plus or minus $300 million. However, Reuters noted that this estimate included some AI-chip sales to China, and analysts flagged ongoing concerns about customer concentration and competitive pressure from Nvidia.
Looking beyond the quarterly report, the bull case extends further. Motley Fool's John Ballard observed that AMD shares have surged roughly 75% over the past month, yet he maintained that the valuation is not stretched given management's long-term profit targets. Ballard pointed to Meta's (META) plans to use AMD's Instinct GPUs, as well as a prior agreement with OpenAI, as catalysts.
Options markets are pricing in a potential swing of up to 8% by week's end, according to Investopedia. Yahoo Finance noted that shares could drop even if results meet expectations. A clear beat, stronger data-center signals, and any indication that TSMC supply constraints won't hinder shipments could sustain the rally. But if the report merely matches forecasts, the stock's recent surge could quickly become its biggest headache.
