The AI chip sector faced a stark reality check on Wednesday as Advanced Micro Devices (AMD) provided a 2024 revenue forecast that fell short of Wall Street’s expectations, causing a sharp decline in AI-related stocks. The news sent AMD’s shares tumbling by 10%, pulling down industry leader Nvidia by 5%, and leading to a 15% drop in Super Micro Computer, a company that integrates both AMD and Nvidia products into its AI-enabled servers.
In total, Wednesday’s trading session erased $143 billion in market value from these three tech giants, highlighting the volatile nature of the AI hardware market.
During AMD’s earnings call, CEO Lisa Su addressed the company’s shortfall in meeting the sky-high market expectations for its AI chips, citing supply constraints rather than a lack of demand as the primary challenge. “We are tight on supply. So there’s no question in the near-term that if we had more supply, we have demand for that product,” Su explained.
Despite raising its revenue guidance for the MI300 AI chip by $500 million to $4 billion, AMD still fell short of the ambitious $8 billion target some analysts had projected. This has raised concerns over AMD’s competitive stance in the fiercely contested AI chip market, particularly against Nvidia, whose H100 chip has set high standards in performance.
Goldman Sachs has pointed out that Nvidia’s upcoming H200 chip is expected to double the inference capabilities of its predecessor, setting a high bar for competitors like AMD. This emerging scenario suggests that AMD’s MI300 might struggle to keep pace, despite claims of superior performance.
Nvidia’s CEO Jensen Huang confidently remarked last month on the competitive landscape, suggesting the superiority of Nvidia’s offerings: “Our total cost of operations is so good that even when the competitor’s chips are free, it’s not cheap enough,” he stated at the Stanford Economic Summit.
This tumult in the AI chip market underscores a broader narrative of intense competition and high expectations, with significant market reactions to any signs of weakness or supply issues. As Nvidia prepares to release its earnings on May 22, the industry and investors alike are on edge, waiting to see if it can meet the lofty expectations set against a backdrop of its competitors’ struggles.