On paper, semiconductor mainstay Advanced Micro Devices (NASDAQ:AMD) produced a reasonably strong report for the first quarter. However, the company competes with tech giant Nvidia (NASDAQ:NVDA) in multiple advanced fields, including artificial intelligence. So investors needed more than just a solid impression. Unfortunately, the generative AI space may be overrated, warranting a cautious approach. Therefore, I am bearish on AMD stock.
Hitting Some Good Marks Wasn’t Enough for AMD Stock
Looking at Advanced Micro First Quarter Results Without broader context, it appears the company has done enough to appease its shareholders. The analysts were looking for 62 cents earnings per share, which the company encountered. In terms of revenue, experts predicted a turnover of $5.47 billion. Instead, the tech company posted $5.48 billion. Additionally, as TipRanks reporter Vince Condarcuri mentioned, the revenue represents a 2.2% increase from last year’s quarter.
AI-related efforts notably supported revenue expansion. “Data center revenues jumped 80% year over year to $2.3 billion. The main driver in this segment was AMD’s MI300 AI accelerator. The MI300 is a competitor to Nvidia’s H100 chip and costs about 33% less. It also tends to be better suited to memory-intensive tasks, such as simulations,” Condarcuri wrote.
Additionally, Lisa Su, CEO of Advanced Micro, mentioned that the widespread deployment of AI is driving demand. In response, the company has ramped up its data center operations to “enable AI capabilities across our entire product portfolio.”
Looking ahead to the second quarter, management estimates revenue will be between $5.4 billion and $6 billion. Analysts previously forecast sales would reach $5.69 billion. Looking at the big picture, the tech giant seemed to be saying the right things. However, investors disagreed, with AMD shares falling sharply after the results were released.
Harsh realities cloud first quarter report
Although Advanced Micro provided many encouraging statistics, the first quarter was not perfect. The company notably suffered from a drop in revenues in its Gaming and Embedded division. During AMD’s earnings conference call, it was revealed that total revenue declined 11% sequentially as the aforementioned unit offset its data center-focused GPU sales.
This is a problem for two reasons. First, Nvidia represents the undisputed leader in GPU sales associated with the AI ecosystem. Yes, it is true that many experts predict that generative AI will be worth $1.3 trillion by 2032. However, the technology field is not a democracy.
With Nvidia’s technical advantage, it’s possible it could grab the lion’s share of the AI hardware market, leaving everyone else fighting for the scraps. Since these are expensive leftovers, investors may not be in the mood to say “good enough.” It’s evident that while AMD stock is down almost 9% over the past month, NVDA is up almost 5%.
In other words, Advanced Micro needs to take over…
