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Optimistic AMD sales projection dampened by financial burdens in China

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Optimistic AMD sales projection dampened by financial burdens in China

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Bloomberg

Advanced Micro Devices Inc (AMD), AMD's closest competitor to Nvidia Corp in artificial intelligence (AI) processors, has warned that US restrictions on sales to China could cost them a staggering $1.5 billion in revenue this year. This revelation, shared during an earnings call on Tuesday, casts a shadow over an otherwise promising outlook.

The looming revenue loss is a direct result of an export restriction imposed last month, targeting AMD's MI308 chips, the company stated.

AMD anticipates a decline in data center revenue during the current period, primarily due to a $700 million reduction in sales of the MI308 product.

CEO Lisa Su remains optimistic about overall demand for AI infrastructure and projects that new chips set to debut soon will boost sales in the second half of the year. However, Su faces mounting investor concerns about trade restrictions and tariffs, as well as competition with Nvidia in the AI chip market.

"We're bullish on the overall AI business. There's strength there," Su explained. "I understand there are uncertainties regarding tariffs and other things, but from an infrastructure standpoint, there's continued investment in AI infrastructure. We're expecting strong growth in the second half of the year."

In late April, AMD predicted an expense of about $800 million due to the new export rules.

Second-quarter sales are forecast to be approximately $7.4 billion, AMD reported. This figure surpasses the average analyst estimate of $7.23 billion.

AMD's first-quarter sales climbed 36 percent year-on-year, reaching $7.4 billion—beating the expected $7.12 billion—with profit amounting to $0.96 per share, excluding certain items.

Revenue in the data center division rose to $3.7 billion in the period, skyrocketing 57 percent from the same quarter the previous year, while personal computer-related sales increased 28 percent to $2.9 billion.

AMD ranks as the second-largest provider of graphics chips, which form the basis for AI accelerators used in data centers.

Nvidia CEO Jensen Huang stated on Tuesday that the Chinese market for AI chips could reach $50 billion within the next couple of years, making it crucial for US companies to maintain access to the country.

"Not being able to address this Chinese market as an American company would be a significant loss," Huang said, speaking to CNBC. "The revenue it'll bring back, the taxes it'll generate, and the jobs it'll create here in the United States—it's essential we retain access."

Recent escalations in regulatory restrictions have prompted Nvidia to write-off $5.5 billion related to its H20 product. The chip, a less powerful processor designed for the Chinese market, now requires special approval from regulators before it can be shipped to customers in China.

"We should let Americans do American — let us go after it and win it," Huang said, adding that the world is "starving for AI. Let us show America's AI leadership right now."

In essence, AMD faces significant trade barriers due to new US export controls on high-performance AI chips meant for China—a market that generates over 24% of AMD's total revenue. The restrictions, put into place in April 2025, necessitate obtaining specific export licenses for AI processors destined for China. The revenue shortfall expected this year, about $1.5 billion, will primarily stem from shrinking sales of AI-related data center products, particularly the MI308 chip, which is explicitly targeted by these export restrictions. The impact will be most acute in the second and third quarters of 2025, with a $700 million decline associated with MI308 chip sales during the current period.

Although Aaron Rakers, an analyst at Wells Fargo Securities, noted that AMD's sales growth is "outstrip[ping] Nvidia's" in PC graphics chips, the recent export restrictions have made it challenging for AMD to tap into a promising market. Despite the setbacks, AMD remains optimistic, expecting to offset some impact through new products and continued growth in AI infrastructure sales outside the restricted components.

  1. AMD's CEO, Lisa Su, anticipates a decline in data center revenue due to a $700 million reduction in sales of the MI308 product, a high-performance AI chip explicitly targeted by new US export restrictions.
  2. The trade barriers faced by AMD due to new US export controls on AI chips meant for China could cost them a staggering $1.5 billion in revenue this year, primarily from shrinking sales of AI-related data center products like the MI308 chip.
  3. The revenue shortfall expected this year will be most acute in the second and third quarters of 2025, with a $700 million decline associated with MI308 chip sales during the current period.
  4. Nvidia's CEO, Jensen Huang, sees the Chinese market for AI chips as crucial for US companies, as it could reach $50 billion within the next couple of years, and emphasizes the need for American companies to retain access to this market.

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