AMD's stock is in free fall, dropping 17% on Wednesday after the chipmaker's first-quarter forecast failed to meet the sky-high expectations Wall Street had set for the AI boom's second-biggest winner. Despite reporting better-than-expected Q4 revenue of $10.27 billion and landing massive deals with OpenAI and Oracle, investors aren't buying it - literally. The collapse signals growing anxiety about whether AI chip demand can sustain the astronomical valuations that have sent AMD up over 100% in the past year.
Advanced Micro Devices just learned that in the AI chip wars, beating expectations isn't enough anymore. You need to obliterate them. The company's shares plunged 17% on Wednesday after delivering what should have been a victory lap - Q4 revenue of $10.27 billion that crushed LSEG consensus estimates of $9.67 billion. But Wall Street had priced in perfection, and AMD's Q1 forecast of $9.8 billion (plus or minus $300 million) versus expectations of $9.38 billion wasn't perfect enough.
The disconnect reveals how much pressure is riding on AMD as the primary alternative to Nvidia in the red-hot AI accelerator market. AMD's stock had surged more than 100% over the past year as enterprises scrambled to secure GPU capacity for training and deploying large language models. That rally built in assumptions of relentless quarter-over-quarter growth that few companies can sustain.
"First, expectations were pretty sky high," Susquehanna analyst Chris Rolland told CNBC's Closing Bell Overtime. But he pointed to a more troubling detail buried in the earnings call: AMD disclosed it had shipped Chinese revenue in Q4 that wasn't factored into Street models. "This was not in Street numbers, so when you account for that, the beat was far less substantial than we would've thought."
That admission matters because it suggests AMD's core data center business - the engine driving its AI story - may be growing slower than headline numbers imply. China shipments have been a wildcard for U.S. chipmakers navigating export restrictions, and their inclusion without prior guidance left analysts recalculating AMD's organic growth trajectory. When you strip out the Chinese surprise, the company's performance looks less like a blowout and more like meeting expectations.
