Lisa Su on AMD's AI Growth and China Outlook

Transcript

It was such an interesting quarter to look back at data in particular CPU strength, not just accelerators. Strong outlook on accelerators. Gaming PC. And then some concern about the future of the China business. But Caroline and I sort of talks for quite a while now about AMD as the best performing chip stock so far this year. I want to if we start... Read More

Key Insights

• AMD's business grew across several segments, with second-quarter revenue up 32% year over year and third-quarter guidance calling for 28% growth. Management highlighted data center, client, gaming, and improving embedded performance as evidence that strength was not limited to AI accelerators.
• AI investment is increasing demand for both CPUs and GPUs because generative AI requires substantial computing capacity. AMD says major hyperscaler spending is pulling through server CPU revenue, while its server processors continue gaining share among cloud and enterprise customers.
• The MI355 is driving AMD's expected accelerator growth in the second half after its June launch. Management says the product competes well on total cost of ownership for inference and training, and that accelerator capability is the primary reason for sequential growth into the third quarter.
• AMD's accelerator strategy uses an annual product cadence to build customer confidence and expand capability. The planned MI400 series is expected to add full rack-level solutions next year, representing a significant step beyond individual accelerator products in AMD's AI roadmap.
• AMD sees a data center accelerator addressable market exceeding $500 billion over the next couple of years. The company expects a large portion of its future accelerator opportunity to come from this expanding market, providing its stated path toward tens of billions of dollars in accelerator revenue.
• China revenue is excluded from AMD's third-quarter outlook because the timing of US export license approvals cannot be predicted. License applications are under review, and AMD says government discussions have improved, but it will not recognize the opportunity in guidance until approvals become clearer.
• AMD expects to restart the China-related supply chain after licenses are approved. Some products could then be completed and shipped, potentially helping recover value associated with the previously discussed $800 million impact, although manufacturing lead times and approval timing limit near-term precision.
• Current demand is driven more by competitive products and customer adoption than by tariff-related purchasing. AMD observed very little demand pulled forward, while data center refresh cycles, enterprise adoption, PC demand, and a strong gaming product cycle supported its outlook for a stronger second half.

Questions & Answers

Q: How does Lisa Su expect AMD to grow AI accelerator revenue?

AMD expects second-half data center growth to be driven primarily by accelerators, including the MI355 launched in June. Lisa Su says an annual product cadence and next year’s MI400 full rack-level solutions provide a path toward tens of billions of dollars in accelerator revenue.

Q: Why does AMD expect stronger data center growth?

AMD is seeing demand for both server CPUs and AI accelerators as major hyperscalers invest in generative AI infrastructure. Its server CPUs are also continuing to gain share across cloud and enterprise customers.

Q: What is AMD’s outlook for third-quarter growth?

AMD guided to 28% year-over-year growth in the third quarter after second-quarter revenue increased 32% year over year. The forecast excludes potential China revenue because the timing of US export-license approvals is uncertain.

Q: Why did AMD exclude China sales from its third-quarter guidance?

Shipments of the MI308 depend on licenses from the US government, and AMD cannot predict exactly when approvals will arrive. Although several licenses are under review and the company has received good indications about their progress, it chose not to include China revenue in its forecast.

Q: What could happen after AMD receives China export licenses?

AMD expects to restart the related supply chain after the required licenses are approved. Some products could then be completed and shipped, but manufacturing lead times and uncertain approval timing prevent precise near-term estimates.

Q: How competitive is AMD’s MI355 accelerator?

Lisa Su describes the MI355 as extremely competitive on total cost of ownership for inference and training workloads. Launched in June, the product is driving part of AMD’s second-half growth and is the primary driver of sequential growth into the third quarter.

Q: What comes next in AMD’s AI accelerator roadmap?

AMD says it has accelerated its roadmap to an annual product cadence. The MI400 series is planned for next year and will bring full rack-level solutions, which Lisa Su calls another major step forward in AI capability.

Q: Is AMD’s growth limited to AI accelerators?

No. AMD also reports server CPU share gains, strength in PCs and gaming, and improvement in its embedded business, which is expected to return to growth in the second half. Lisa Su says all of AMD’s businesses are performing extremely well.

Summary & Key Takeaways

• AMD reported a strong first half, with second-quarter revenue rising 32% year over year and third-quarter guidance implying 28% growth. Data center CPUs continue gaining share in cloud and enterprise, while AI investment by major hyperscalers is increasing demand for both CPUs and GPUs alongside strength in PCs and gaming.

• Accelerators are expected to become the primary driver of AMD's data center growth during the second half. The MI355, launched in June, is positioned for inference and training workloads, while an annual roadmap cadence and the planned MI400 rack-level solutions support AMD's ambition to reach tens of billions in accelerator revenue.

• China remains the main source of uncertainty because MI308 shipments require US government licenses. AMD says applications are under review and indications have improved, but it excluded China revenue from third-quarter guidance. The company expects to restart its supply chain and ship some products after approvals, although timing remains unpredictable.