Lisa Su on AMD's AI Growth and China Outlook

TL;DR

AMD expects data center accelerators to drive growth in the second half, supported by its MI355 launch, annual product cadence, and planned MI400 rack-level systems. CEO Lisa Su says CPU, PC, gaming, and embedded demand is also improving, while potential China sales remain excluded from third-quarter guidance because US export license timing is uncertain.

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 is AMD planning to grow AI accelerator revenue?

AMD plans to grow accelerator revenue through second-half adoption of the MI355, broader customer deployment, and an accelerated annual product roadmap. The company says the MI355 is competitive for both inference and training based on total cost of ownership. Next year, the MI400 series is expected to introduce full rack-level solutions, expanding AMD's offering beyond individual chips and supporting its goal of reaching tens of billions of dollars in accelerator revenue.

Q: Why does AMD expect stronger data center growth?

AMD expects stronger data center growth because demand is rising for both server CPUs and AI accelerators. Major hyperscalers are investing in generative AI infrastructure, which requires substantial computing resources and pulls through CPU as well as GPU revenue. AMD also reports continued server CPU share gains in cloud and enterprise markets, while its MI355 accelerator is expected to become the primary source of sequential data center growth in the second half.

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

AMD guided to third-quarter growth of 28% year over year after reporting 32% year-over-year growth in the second quarter. The outlook does not include potential China accelerator revenue because export license timing remains uncertain. Management says second-half demand is stronger than it expected a few months earlier, with support coming from accelerators, server CPUs, PCs, gaming products, and an embedded business expected to return to growth.

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

AMD excluded China sales from third-quarter guidance because shipments of the MI308 depend on licenses from the US government, and the company cannot predict exactly when approvals will arrive. AMD says several licenses are under review and that it has received positive indications about their progress. Management chose a cautious forecast that assumes no China contribution, even though it believes discussions and the review process are moving in a favorable direction.

Q: Can AMD recover the $800 million China impact?

AMD expects to restart its supply chain once the necessary export licenses are approved and believes it can ship some affected products afterward. However, completing manufacturing requires time, and the amount recognized in any period will depend on the timing of government decisions. Management did not promise that the entire $800 million impact would be recovered on a specific schedule, instead emphasizing that the process appears to be moving in the right direction.

Q: How competitive is AMD's MI355 accelerator?

AMD describes the MI355 as highly competitive for AI inference and training workloads, particularly when customers evaluate total cost of ownership. The product launched in June and is already contributing to expected second-half growth. Customer interest and validation are supporting broader adoption, according to management. AMD also views the MI355 as one stage in an annual roadmap that will advance to MI400 full rack-level solutions next year.

Q: Is AMD's CPU growth caused by market recovery or share gains?

AMD says both factors are contributing. Overall demand patterns have improved, including data center refresh activity and enterprise and PC purchasing. At the same time, AMD believes its server and client CPUs hold leadership positions and are gaining meaningful traction with cloud and enterprise customers. Management therefore attributes CPU strength to a combination of healthier end-market demand and competitive products that are winning additional customer adoption and market share.

Q: Are tariffs causing customers to pull AMD purchases forward?

AMD says it observed very little evidence that customers were accelerating purchases to get ahead of tariffs or price increases. The company monitors both shipments to customers and products sold through to end users, and those measures indicate genuine demand. Management attributes the larger business effect to strong products, data center refresh cycles, enterprise adoption, PC demand, and a favorable gaming product cycle, while describing tariffs as a smaller influence.

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.