AMD share rises 7% after strong numbers and huge demand for AI chips

Chip manufacturer AMD surprised investors with a much stronger sales forecast than anticipated. Thanks to the huge demand for chips for artificial intelligence, the company expects to generate billions of dollars in additional sales in the coming months.

The AMD share shot up by about 7 percent in the US after market trading on Tuesday evening. This gives AMD a major boost to confidence in the technology sector, following the recent price declines on Wall Street.

AMD expects sales of approximately $17 billion in the fourth quarter, with a possible deviation of three percent. This puts the expectation well above the 16.3 billion dollars that analysts had expected.

The strong outlook is mainly due to the huge demand for chips for AI data centers. Large technology companies are investing hundreds of billions of dollars in the infrastructure needed to further develop artificial intelligence.

AMD benefits fully from this wave of investment. The company has become a major supplier of AI chips and is trying to gain more and more ground on Nvidia, which currently dominates the market.

According to Finance Director Jean Hu, the demand for AMD's data center products is growing faster and faster. As a result, the company expects a further increase in both sales and profits in the coming months.

The positive outlook comes at an important time. Technology stocks have come under a lot of pressure in recent weeks, as investors increasingly doubt whether the huge AI investments will ultimately generate enough money.

AMD's figures therefore give investors some confidence. They show that technology companies are still spending large amounts on AI infrastructure for the time being.

That optimism was also visible in other technology stocks on Tuesday evening. Companies such as CoreWeave, Nebius, Dell and Hewlett Packard Enterprise also rose in US aftermarket trading.

Not only the outlook was better than expected. The results for the third quarter also exceeded analysts' forecasts.

AMD posted revenue of $13.4 billion, up 45 percent from a year earlier. Analysts had expected about $13.1 billion.

Adjusted earnings were $2.09 per share. That was also higher than the expected 1.97 dollars.

Data centre activities in particular performed strongly. Revenue from this unit nearly doubled to $8.5 billion. Analysts had expected about $8.2 billion.

This makes it increasingly clear how important AI has become for AMD. The total turnover of the company is now twice as high as it was two years ago.

However, not everything is going well.

Combined revenue from PC chips and gaming fell 8 percent to $3.7 billion. The market for traditional computers is suffering from rising prices for memory chips.

This is partly due to the growth of AI. Data centers require massive amounts of memory, making them less available for laptops and regular computers. The higher prices then depress demand.

AMD also expects its gross profit margin to decline slightly in the fourth quarter, from 56 to about 55 percent. This means that the company has slightly less left over from every $100 turnover after deducting the direct production costs.