AMD faces market dip amid production constraints

AI demand outpaces company’s supply, sending shares lower.
AMD says new US export controls on AI chips could cost it $800 million if licences are not granted for sales to China and other restricted countries.

AMD’s shares dropped 8% on Wednesday as the chip giant’s revenue forecast fell short of investor hopes, despite strong gains from the AI-driven chip boom. The forecast suggests AMD’s AI chip sales could hit $5 billion by 2025, but CEO Lisa Su warned that production would struggle to meet demand, likely tightening supply through next year. This cautious outlook could see AMD lose up to $20 billion in market value, underscoring investor concerns.

Analysts noted that while AMD’s AI performance is promising, demand may outpace supply, raising risk for the company’s growth prospects. Stacy Rasgon of Bernstein observed that for an “AI name” like AMD, even modest guidance could raise eyebrows, especially with expectations for business “lumpiness” through 2025. Unlike AMD, Nvidia—a key AI chip competitor—showed little market impact, reflecting investor confidence in its supply stability.

AMD’s stock, up nearly 156% since late 2022, is now trading at around 32 times its forward earnings, slightly lower than Nvidia’s 36 times. Despite the recent dip, analysts still see upside potential, with the median target price set at $187.50, or about 13% above AMD’s last close.