In the face of a challenging quarter, Advanced Micro Devices (AMD) offered a ray of hope to its stakeholders by projecting a significant revenue goal from its upcoming AI chip. AMD’s announcement on Tuesday set a bold target of $2 billion in sales for 2024, which marks the company’s entry into a sector dominated by Nvidia.
Quarterly Figures Underwhelming, But Future Looks Bright
Although AMD’s fourth-quarter forecasts fell short of expectations, citing a dampened gaming sector and a reduced demand for programmable chips, the revelation of the AI chip’s potential turned investor sentiment around. Post-market trading recovered from a 4.6% drop to stability as AMD detailed its plans to challenge Nvidia with the MI300X chip in the data center AI market.
AMD’s Chief Executive, Lisa Su, revealed commitments from “multiple, large hyper-scale customers” for the MI300 chip, signaling strong initial confidence from major tech and cloud computing firms. This endorsement seems to be a pivotal factor in the expected revenue rise to $400 million in the fourth quarter for the AI chip, up from a previous forecast of $300 million.
The overall outlook for AMD remains mixed as the company navigates through a recovering PC market and faces a decline in other chip segments. Notably, the Xilinx division, known for its profitable programmable chips, is experiencing a slump similar to that anticipated by Intel for the coming quarters.
Navigating Geopolitical Tensions and Customer Cuts
The road ahead includes navigating the effects of U.S. sanctions on chip exports to China, especially as AMD plans to launch its high-end AI chips. Additionally, expenditure reductions by key client Meta Platforms may further impact AMD’s performance.
AMD’s current-quarter revenue is pegged around $6.1 billion, with a margin of error of $300 million, shy of the $6.37 billion analysts expected. The company’s adjusted gross margin forecast of 51.5% also slightly misses the anticipated 52.1%. Despite these figures, AMD’s third-quarter performance showed resilience, with a 4% rise in adjusted revenue and earnings surpassing analyst predictions.
The third-quarter earnings painted a varied picture across AMD’s business segments. While the data center revenues stood firm, the client segment saw a substantial increase, suggesting a rebound in the PC market. Conversely, the embedded segment faced a decrease, and the gaming sector also saw a dip in revenue.
As AMD gears up to challenge the AI chip market, the industry eyes are set on how this strategic move will unfold in the company’s financial fabric and market position.
Advanced Micro Devices (AMD), a prominent tech company based in Santa Clara, California, has been deemed Shariah-compliant by Musaffa’s screening. The company operates across four segments: Data Center, Client, Gaming, and Embedded, producing a variety of semiconductor products from CPUs to GPUs and SoCs.
In assessing AMD’s Shariah compliance, Musaffa checked three main criteria: the nature of business activities, the proportion of interest-bearing debt, and the level of interest-bearing securities relative to the company’s market cap. AMD’s revenue from non-Shariah-compliant activities is only 0.27%, well below the 5% limit. Its interest-bearing debt is just 2.12% against the market cap, and interest-bearing securities constitute 5.03% of the market cap, both within acceptable ranges.
Thus, AMD is considered a HALAL stock, making it a permissible investment for Muslim investors according to Islamic investment principles.
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