(Bloomberg) — Advanced Micro Devices Inc. gave a strong sales forecast for the current quarter, signaling that the chipmaker is continuing to make inroads into its most lucrative market: data center processors.
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AMD forecast second-quarter sales of about $6.5 billion, compared with an average analyst estimate of $6.03 billion. That helped push shares up as much as 8.3% in late trading on Tuesday.
The outlook helped allay concerns that the chip market is slowing, signaling that AMD is making more profit on Intel Corp. The company, which for years lagged far behind Intel in computer processors, is on track to end 2022 with nearly four times as many. as much revenue as in 2019. New products and better execution have helped AMD win over customers who were once skeptical about its capabilities.
AMD’s outlook contrasts with a recent forecast from Intel, which was hit by an inventory buildup at some of its PC customers. The return of Covid-related lockdowns in parts of China has also reduced the supply of components needed to complete devices, Intel said. Other chipmakers, such as Texas Instruments Inc., have said such outages are also hurting growth.
AMD’s forecast includes a boost from its acquisition of Xilinx Inc., a deal it completed in the first quarter.
“Each of our businesses grew by a significant double-digit percentage year-over-year,” AMD CEO Lisa Su said in a statement. The growth of the existing business and the Xilinx acquisition have helped to strengthen expectations for the full year, she said.
AMD has lowered its expectations for the PC market this year. Previously, the company had not projected growth in PC shipments from 2021, but now expects a decline in the high-single-digit percentage range, Su said. AMD will be less affected by this because it is still gaining share, particularly in more expensive models, he said.
Despite AMD’s rapid growth, investors have shunned the stock this year as part of a broader pullback in semiconductor stocks. Investors have been particularly wary of chipmakers that have made rapid gains in the past three years, fearing a near collapse. AMD closed at $91.13 in New York on Tuesday, down 37% this year.
The latest forecast suggests that AMD still has momentum. Under Su, the company has developed cutting-edge components and outsourced production, something its predecessors struggled to do. That has prompted more chip customers to ditch Intel in favor of AMD.
Intel CEO Pat Gelsinger, who took over last year, is planning his own change. He now claims that his company offers better PC processors than AMD and that it will regain its market share.
Unlike Intel, which makes its products in-house, AMD works with Taiwan Semiconductor Manufacturing Co., giving it access to better technology. Using the latest manufacturing techniques can improve the way chips process data and the amount of information they store.
While TSMC has overtaken Intel in technology capabilities, it has struggled to meet demand for chips. But AMD has an advantage over other TSMC customers. Its products are some of the most expensive items to come out of Taiwanese factories, which in theory puts you in a better position to get the supplies you need.
AMD is also the second largest manufacturer of graphics chips used in add-on cards by PC gamers. It competes in that market with Nvidia Corp. and will face fresh opposition from Intel, which has started offering products for that segment for the first time in years.
AMD, based in Santa Clara, California, supplies graphics chips used in Microsoft Corp.’s Xbox and Sony Corp.’s PlayStation.
AMD reported first-quarter earnings of $1.13 per share, excluding some items, well above the 92-cent estimate. Sales rose 71% to $5.9 billion, beating projections of $5.3 billion. The first quarter also included contributions from Xilinx.
The chipmaker forecasts annual revenue of $26.3 billion by 2022, a 60% gain from the previous year. That compares with a median estimate of $24.1 billion.
AMD is gaining ground among the biggest buyers of computer processors, owners of the giant data centers that are the backbone of the Internet. About 48% of all new processors installed in these data centers were purchased from AMD in March, according to Mark Lipacis, an analyst at Jefferies & Co.
(Updates with AMD’s outlook for the PC market in the seventh paragraph.)
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