Advanced Micro Devices (NASDAQ: AMD) reported its first-quarter results, showing promising growth potential in the data center segment, despite a challenging year for the stock, which has seen a 35% decline. AMD’s revenue in this sector grew significantly, surging 57% to $3.7 billion. While still trailing behind industry rival Nvidia (NASDAQ: NVDA), this growth highlights AMD’s strengthening position.
The company attributes its progress to increased market share in central processing units (CPUs) and substantial sales of its Instinct graphics processing units (GPUs). AMD has emerged as a leader in the data center CPU market, where the demand is rising even though it is not as large as the GPU market. In Q1, several cloud providers began offering services powered by AMD’s latest EPYC chips, showcasing their appeal in enterprise computing.
Moreover, notable hyperscalers have increased their utilization of AMD’s GPUs for generative artificial intelligence (AI) tasks like search algorithms and recommendations. A major AI model company is reportedly running a significant portion of its inference operations on AMD GPUs, indicating success in penetrating the AI sector, which is expected to grow substantially.
However, AMD faces challenges from export restrictions, particularly concerning its MI308 GPU shipments to China. The company anticipates losing approximately $700 million in expected revenue during the second quarter due to these new export controls. Over the course of the year, AMD expects the total impact of these restrictions to be around $1.5 billion, mostly in the second and third quarters.
Despite these hurdles, AMD’s ability to adapt and grow in the data center sector, especially with the shift towards AI inference, positions it for potential future success. The developing landscape provides a fertile ground for AMD to leverage its strengths, particularly as the demand for AI-compatible hardware increases.
Overall, AMD’s recent performance offers a glimpse of optimism amid challenges, suggesting that while the road ahead may be bumpy, there are significant opportunities for growth as trends in technology evolve.