On May 1st (local time), some AI stocks in the U.S. stock market experienced a decline, with NVIDIA (NVDA.US) gapping down by 3.89%, Super Micro Computer (SMCI.US) gapping down by a significant 14.03%, and Advanced Micro Devices (AMD.US) also gapping down by 8.91%.

From the news perspective, the substantial drop in AMD's stock is related to its latest financial report.

Net profit turns from loss to profit, but some business segments fall short of expectations.

AMD is a global semiconductor company that primarily provides server microprocessors (CPUs), graphics processing units (GPUs), accelerated processing units (APUs), data processing units (DPUs), field-programmable gate arrays (FPGAs), smart network interface cards (SmartNICs), artificial intelligence (AI) accelerators, and adaptive system-on-chip (SoC) products for data centers; CPUs, APUs, and chipsets for desktops, laptops, and handheld personal computers; discrete GPUs and semi-custom SoC products and development services; as well as embedded CPUs, GPUs, APUs, FPGAs, system-on-modules (SOMs), and adaptive SoC products.

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In the first quarter of 2024, AMD's revenue increased by 2.24% year-over-year to $5.47 billion, slightly above market expectations, but it experienced a sequential decline, falling short of the $6.17 billion in the fourth quarter of 2023; the company achieved a net profit of $123 million, compared to a loss of $140 million in the same period last year.

AMD stated in its financial report that the increase in first-quarter revenue was mainly due to the growth in revenue from the data center business unit, attributed to the increased sales of AMD Instinct GPUs and fourth-generation AMD EPYC CPUs, as well as the increase in customer segment revenue driven primarily by the sales of Ryzen 8000 series processors, but the decline in gaming segment revenue has held back overall performance.

Specifically, the data center division's revenue increased by 80% year-over-year to $2.34 billion, setting a historical record for the business unit and exceeding market expectations.

It is worth mentioning that the data center division includes AMD's AI chip business, which is also the most closely watched business unit by investors.

The client business unit, which includes personal computer (PC) sales, saw a significant year-over-year increase of 85% in revenue to $1.37 billion in the first quarter, mainly due to the increase in both volume and price of Ryzen processors.Its gaming division's revenue plummeted 48% year-over-year to $920 million, significantly below market expectations, mainly due to a decrease in semi-custom revenue and a decline in AMD Radeon GPU sales.

Additionally, as customers continue to manage inventory levels, the Embedded Business Group's revenue fell 46% year-over-year to $850 million, also below expectations.

Overall, AMD's performance in the first quarter was better than expected, and its AI chip revenue saw a significant increase, but its revenue scale is still far behind NVIDIA's.

Is the AI chip sales guidance disappointing?

AMD also forecasts revenue of $5.7 billion for the second quarter of 2024, with a fluctuation of $300 million, with the midpoint of the range equating to a year-over-year increase of about 6% and a sequential increase of about 4%, which is roughly in line with market expectations, and the non-GAAP gross margin is expected to further increase to 53%.

In other words, AMD's second-quarter guidance does not hold any surprises.

At the same time, AMD's CEO, Dr. Lisa Su, has raised the annual sales forecast for the 2024 MI300 AI accelerator chip from $3.5 billion at the beginning of the year to $4 billion, a figure that is far from market expectations, which may be the biggest reason for its stock price drop.

Nowadays, the development in the AI field is booming, and the demand for AI chips continues to explode. NVIDIA is essentially in a monopolistic position, reaping huge profits, with its data center business division's sales reaching as high as $18.4 billion in the first quarter of 2024, a staggering year-over-year increase of 409%.

AMD is seen by the market as the main challenger to NVIDIA in the field of AI chips, and even AMD itself believes so. However, the sales scale of the two in the AI chip field is vastly different, teaching investors a harsh lesson.

In terms of performance, AMD's MI300 chip is positioned against NVIDIA's H100 series accelerators, but now NVIDIA is launching the H200, which has already been delivered. Additionally, NVIDIA has introduced a new generation of AI chips, Blackwell (GB200), rumored to have a performance leap of 30 times over the H100.Whether it comes to sales volume or the performance of AI chips, AMD still has a long way to go to catch up with NVIDIA.

In summary:

Under the wave of AI, although AMD's stock price increase is not as significant as NVIDIA's, its overall performance is actually quite strong. However, its first-quarter report only slightly exceeded expectations, and the second-quarter performance guidance is also unremarkable. The AI chip sales figures are not satisfactory to investors, so it is normal for its stock price to fall.

Nevertheless, AMD remains the most significant competitor to NVIDIA, and the subsequent progress of its AI chips is worth continuous monitoring.