AMD's faith is full, but its performance outlook cannot match the imagination space brought by OpenAI's large order.

NVIDIA Corporation's long-time biggest competitor in the data center and PC chip field, AMD (AMD.US), announced its latest performance report on Wednesday morning Beijing time. AMD is one of the few companies in the world that can compete at the GPU level with NVIDIA Corporation's "NVIDIA Corporation AI GPU series" in the AI computing infrastructure field, which is considered a monopoly. Therefore, some top Wall Street investment institutions are very optimistic about AMD's ability to continue to erode NVIDIA Corporation's dominant position and achieve growth far superior to NVIDIA Corporation's explosive performance expansion curve. After the recent surge in investments in the AI computing industry, which has significantly driven up the stock prices of NVIDIA Corporation, AMD, Broadcom Inc., Micron, and other leaders in computing power, as well as a new round of significant AI computing purchases that have boosted AMD's stock price, pushing Wall Street's expectations for AMD's performance even higher, the company's latest official performance outlook failed to impress institutional investors on Wall Street. AMD's latest performance did not strengthen the "AI faith" as some investors had expected. In a recent statement, the chip company stated that its fourth-quarter revenue outlook is approximately $9.6 billion - AMD's Q4 revenue outlook range is $9.3 billion to $9.9 billion; the non-GAAP gross margin rate expectation for the fourth quarter is around 54.5%, in line with the average expectations of Wall Street analysts. Although this outlook is higher than the average analyst expectation of around $9.2 billion, some analysts had forecasted up to $9-10 billion. Clearly, after AMD announced its performance, the post-market drop of over 3% indicates that the market is not satisfied and even somewhat disappointed with this outlook. After AMD's major procurement agreements with OpenAI and Oracle Corporation, Wall Street's expectations for AMD's performance and target stock price have been continuously raised. The dynamic news flow and bullish sentiment in the market have driven AMD's stock price up over 55% since October, and the company's market value has soared from $270 billion before the agreements to around $410 billion. Following its significant performance boost in Q3, driven by its data center and PC businesses, AMD achieved strong growth. In Q3, the company's overall revenue grew by 36% year-on-year to $9.25 billion, surpassing Wall Street's average expectation of $8.7 billion, with a significant contribution from its data center business, which offers the strongest GPU computing power competition to NVIDIA Corporation's Blackwell AI GPU and high-performance CPUs for data centers. In Q3, AMD's operating profit increased by 75% year-on-year to $1.27 billion. Excluding certain items, AMD's adjusted EPS for Q3 was $1.20, higher than analysts' average expectation of $1.17 per share, compared to just $0.92 per share in the same period last year. AMD's data center revenue grew by 22% year-on-year to $4.3 billion, surpassing analysts' average expectation of around $4.14 billion. Revenue from customer and gaming businesses closely related to personal computers also increased significantly by 73% year-on-year to $4 billion, far exceeding analysts' average forecast of approximately $2.6 billion. In a performance statement, AMD CEO Lisa Su said that with revenue and profit growth driven by the AI trend, these figures represent a clear upward trajectory in their growth. She stated in a performance call with global investors and analysts that the business related to AI training/inference computing clusters would bring in "billions of dollars" in revenue annually by 2027. At the same time, she mentioned that the company's PC chip business growth rate would be significantly faster than the overall market. AMD's recent significant long-term cooperation agreements with OpenAI, Oracle Corporation, and U.S. Energy Corp. reflect the market's heightened interest in its MI series AI GPU product line. These products compete head-to-head with NVIDIA Corporation's Blackwell AI GPUs for AI large model training and running high-volume AI inference workloads. In addition to AMD, the company is also one of the largest suppliers of GPUs and high-performance central processing units (CPUs) for personal computers and data center servers. Last month, one of its main competitors, Intel Corporation (INTC.US), pointed out that the AI trend was driving strong demand for new AI-featured laptops and data center server CPUs. In addition to its data center AI GPU business, AMD has been gaining market share from its long-time rival, Intel Corporation, in these key business areas. However, like NVIDIA Corporation, AMD is also caught up in the ongoing U.S.-China trade tensions. Washington has imposed strict restrictions on exporting the most powerful AI accelerators to some Asian countries due to security concerns. American chip giants have been lobbying for relaxed rules, arguing that expanding business in the Chinese market will strengthen American AI capabilities. However, the Trump administration has been cautious about such lobbying efforts. AMD previously warned that these export restrictions to China would cost the company approximately $1.5 billion in revenue this year. The company stated on Tuesday that its Q3 performance did not include revenue from the shipment of the MI308 series AI chips to China. The recent super heavyweight cooperation agreement with OpenAI has opened up huge possibilities for AMD's stock price and performance outlook. Recently, global prices for high-performance storage products in the DRAM and NAND series have continued to rise significantly. In addition, the highest valued AI startup company in the world, OpenAI, has completed a transaction exceeding $1 trillion for AI computing infrastructure, and leading chip manufacturer Taiwan Semiconductor Manufacturing Co., Ltd., storage giant Samsung, and SK hynix have announced extremely strong above-expectation performance and have raised revenue growth expectations for 2025 and 2026. This has significantly enhanced the long-term bullish narrative logic in the AI GPU, ASIC, HBM, data center SSD storage systems, liquid cooling systems, and core power equipment sectors. However, AMD's performance outlook currently does not seem to reinforce the "AI bull market narrative logic." The company's latest performance outlook clearly does not match the immense potential created by the super-heavyweight cooperation with OpenAI. In a recent bullish research report, HSBC reiterated a "buy" rating on AMD, NVIDIA Corporation's long-time competitor, and raised its target price significantly from $185 to $310, the highest target price level on Wall Street. Analyst Lee wrote that the recent deal with OpenAI "presents a more favorable bullish outlook," enhancing performance forecasts clarity and market bullish sentiment; he also added, "there may be further upside from premium pricing and additional AI GPU shipments." AMD's stock closed at $250.05 on Tuesday. AMD's stock price has risen over 110% so far this year, with the majority of the gains concentrated in the past month. AMD has jumped from 44th to the top 20 in market cap rank among S&P 500 index components since the beginning of the year, with its market value exceeding $400 billion and hitting new all-time highs. The recent strong surge in AMD's stock price is mainly driven by the company's important AI computing infrastructure cooperation agreement worth tens of billions of dollars with the AI application leader OpenAI. This not only validates the strong AI computing infrastructure technology of AMD but also makes Wall Street investment institutions more optimistic about its future financial prospects. The agreement signed between AMD and OpenAI includes a 6GW AI GPU supply agreement for multiple years and generations of products, with the initial 1GW deployment expected to start in the second half of 2026, deploying the AMD Instinct MI450 series AI GPU. More significantly, AMD has issued up to approximately 160 million warrants to OpenAI, with an exercise price of around $0.01 per share; if all exercised, it corresponds to giving OpenAI up to about 10% of AMD's equity. The ownership of the warrants is subject to the following triggering rules: the deployment of the first 1GW and subsequent 6GW GPU scale; and AMD's stock price reaching the target of $600. AMD's purchase of the MI450 offers a significant leap in AI performance compared to AMD's previous generation MI300X / MI350X, known as a "memory monster." In terms of technology, it utilizes the Taiwan Semiconductor Manufacturing Co., Ltd.'s 2nm (N2) most advanced process, based on the CDNA 5 advanced architecture, with a memory bandwidth increase from 5.3 TB/s to 19.6 TB/s compared to the MI300X, and a memory capacity increase from 192GB to 432GB. For players like OpenAI engaged in super-large-scale multimodal + ultra-long-context LLM, the value of high memory and bandwidth often outweighs the cost of adding a few more TOPS of computing power. For OpenAI, this represents the establishment of a second AI GPU computing power front based on "large memory/bandwidth + more advanced process" outside the NVIDIA Corporation's Blackwell AI GPU system.