AMD Warns Of $1.5 Billion Hit From China Microchip Restrictions

Advanced Micro Devices (AMD) has issued strong financial results but warned of a $1.5 billion U.S. revenue hit from American government restrictions imposed on microchip shipments to China. The Silicon Valley-based company that designs microchips and processors reported first-quarter earnings per share (EPS) of $0.96 U.S., which was ahead of the $0.94 U.S. expected on Wall Street. Revenue in the quarter totaled $7.44 billion U.S., which beat the $7.13 billion U.S. consensus expectation of analysts. Sales grew 36% from a year ago. Despite the strong print, AMD executives warned of the likely impacts on future results from artificial intelligence (A.I.) microchip export controls related to China shipments.Specifically, management said that they expect about $700 million U.S. in lost revenue during the current quarter from export controls, and $1.5 billion U.S. in total this fiscal year.In addition to the expected revenue hit, AMD also forecast $7.4 billion U.S. in sales with a gross margin of 43% for the current quarter.The revenue guidance was ahead of Wall Street estimates that called for sales of $7.25 billion U.S. AMD remains the closest competitor to Nvidia (NVDA) for graphics processing units (GPUs) that are deployed in data centres to run generative A.I. applications and models.Management said their A.I. GPU sales totaled $5 billion U.S. in Q1. Data centre sales were up 57% on an annual basis.The company’s other major segment, “Client and Gaming,” includes chips for consumer devices such as laptop computers and video game consoles. That segment saw its sales rise 28% on an annual basis to $2.90 billion U.S. in the quarter. AMD said sales for its laptop and PC chips, which it calls client revenue, surged 68% year-over-year because of strong global demand.Gaming sales, however, declined 30% on an annual basis, which the company attributed to a decrease in video game console sales.The stock of AMD has fallen 18% this year to trade at $98.62 U.S. per share.