Advanced Micro Devices (AMD), evaluated as a competitor to Nvidia in the artificial intelligence (AI) chip market, announced on the 6th (local time) that it faces an unavoidable sales drop of about $1.5 billion (about 2 trillion won) due to the United States' semiconductor export restrictions against China. However, AMD emphasized that global investment in AI continues amid the U.S.-China trade conflict and projected that its Q2 performance would exceed market expectations.
During the earnings conference call, AMD explained that it will need a separate license to export its advanced AI chip "MI308" to China due to the export restrictions implemented last month, leading to this forecast. The company estimates that revenues related to MI308 will decrease by about $700 million (approximately 970 billion won). China accounts for more than 24% of AMD's total revenues and the high-performance AI chips that have been restricted from export are among its major sources of revenue.
Earlier, Nvidia stated that it expects a loss expense of $5.5 billion (about 7 trillion won) due to the restrictions on exports to China, but it has not disclosed the extent to which this expense will affect overall revenues.
Although export routes to China are restricted, AMD emphasized that the demand for AI infrastructure remains strong. Lisa Su, AMD's Chief Executive Officer (CEO), noted, "We are very encouraged by the overall AI business," adding, "We believe the strong momentum in this area will continue." She acknowledged that there are uncertainties regarding tariffs but expressed that aggressive investments in AI infrastructure are still ongoing, expecting strong growth in the second half of the year.
Following a better-than-expected Q1 performance, AMD is projected to report solid results in Q2 as well. Q1 revenues increased by 36% year-on-year to $7.4 billion (about 10.23 trillion won), surpassing market expectations of $7.12 billion. The adjusted earnings per share were 96 cents, also exceeding the market expectation of 94 cents. By institutional sector, data center revenues reached $3.7 billion (about 5.14 trillion won), a 57% increase year-on-year, driven by strong sales of central processing units (CPUs) and graphics processing units (GPUs). Revenues from the PC and gaming sectors amounted to $2.9 billion (about 4 trillion won), up 28% from the previous year.
AMD's projected Q2 revenue estimate of about $7.4 billion (approximately 10.23 trillion won) exceeds market expectations of $7.23 billion (about 10 trillion won). AMD's advanced AI chips, alongside Nvidia's chips, are used to power AI systems of major corporations like Meta, Alphabet, and Microsoft (MS), which are competing to build AI infrastructure and continue making significant investments. Initially, there were predictions that uncertainty from the tariff war would lead these corporations to reduce AI investment scales; however, they have stated they will either maintain their previously announced investment levels or invest more in AI.
Despite AMD's optimistic outlook, the market is showing a cautious attitude. The Q2 performance forecast is interpreted as chip customers pre-purchasing inventory in anticipation of future U.S. tariffs. Dan Morgan, a researcher at the U.S. financial firm Synovus Trust, noted, "There may be pre-purchases occurring in preparation for the possibility of additional tariffs on PC chips." Kingai Chan, a researcher at U.S. research company Summit Insights, assessed that "the outlook exceeding Wall Street expectations is the result of customers stockpiling inventories to avoid tariffs." After the earnings announcement, AMD's stock fluctuated in after-hours trading and is currently up 1.7% at $100.32. AMD's stock has decreased by 18% this year.