Advanced Micro Devices and Super Micro Computer led a selloff in chip stocks on Wednesday after their earnings disappointed investors, who had piled into the sector on hopes rising AI investments would boost demand.
AMD was down 5.4% and is on course to lose more than $13
billion in market value.
Its forecast of $4 billion in AI chip sales for 2024 fell
short of Wall Street's lofty expectations, having been used to Nvidia's massive
forecasts over the past year.
Super Micro Computer, whose near-200% stock jump this year
has outpaced even gains in Nvidia, tumbled over 11% as its third-quarter
revenue missed estimates amid questions over the profitability of a new line of
servers.
“As the market is shifting more towards risk-off over the
last couple of days, it’s not shocking that unless these companies are beating
earnings by a mile that some of the hot air is coming out of them for now,”
said Russell Hackmann, president of Hackmann Wealth Partners.
Executives of both AMD and Super Micro Computer said supply
constraints were hampering their efforts to capitalize on demand for equipment
powering the boom in generative AI.
“Stepping back, AMD has several customers who are all trying
to ramp MI300 (AI chip) very quickly. This is stressing the supply chain to a
certain extent,” said analysts at TD Cowen.
“However, from a demand perspective, customer engagement is
in fact increasing, not only for MI300X but its successor products.”
Other AI-linked chip firms also traded lower, with Marvell
Technology down 1.5% and Nvidia falling 1.7%.
The stocks have widely outperformed the benchmark S&P
500 index this year and powered a 11% jump in the Philadelphia Semiconductor
Index.
Several analysts were still positive on AMD, saying easing
supply chain constraints should allow the company to increase its share of the
AI chip market and potentially reap billions of dollars in revenue.
At least 10 analysts lowered their price target on AMD,
while eight raised their view, according to LSEG data. Super Micro saw three
price target increases and two cuts.
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