AMD, despite strong Q2 performance, stock falls...Bernstein "The real battle is in Q4"

▲ AMD/AI generated image

AMD's stock fell by about 4.5% immediately after its Q2 earnings announcement. However, Bernstein believes that Helios in Q4 will be a growth inflection point.

Stacy Rasgon, Senior Analyst at Bernstein, evaluated AMD's Q2 earnings as “fine and excellent overall” in an interview with CNBC on August 5 (local time). He explained that revenue and EPS forecasts exceeded his expectations, and the gross profit margin met expectations. Rasgon maintains an 'Outperform' rating on AMD with a price target of $600.

He attributed the stock's decline after the earnings announcement to heightened market expectations. The analysis suggests that investors demanded higher performance from AMD after Intel (INTC) previously released strong results. Rasgon stated, “Expectations were somewhat elevated after Intel's results, but AMD's initial results look good.”

AMD expects its data center business to accelerate in the second half of the year. Rasgon noted that while the Q3 outlook is strong, the full-scale expansion of the artificial intelligence (AI) business is expected to materialize in Q4 when Helios becomes operational. He further analyzed that if MI450 and Helios rack shipments increase from next year, AMD's AI business could reach a significant growth inflection point.

In the competition with Nvidia (NVDA), he emphasized the overall growth potential of the AI market rather than market share. Rasgon stated, “The right question is whether the opportunity is still large, rather than who is winning or losing. If the market is big, everyone can perform well.” He explained that while AMD can significantly increase shipments from a low starting point, competitors including Nvidia are also growing.

Demand for server central processing units (CPUs) was also assessed as outstripping supply. Rasgon said that customers are essentially buying all the volume that manufacturers can produce. Intel's gross profit margin improved by 2 percentage points by selling even products that it had previously removed from its books due to low sales potential. Rasgon pointed out that the exact shipping time of Helios, revenue related to Anthropic, and the scale of data center growth next year are key issues in the earnings call.

[Article Key Summary]

-AMD's stock fell by about 4.5% immediately after its Q2 earnings announcement, but Bernstein assessed the earnings themselves as fine.

-The data center business is expected to accelerate in the second half of the year, with significant growth for Helios and MI450 anticipated in Q4 and next year.

-Bernstein maintained an 'Outperform' rating and a price target of $600 for AMD.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*