财报前瞻｜在英伟达的阴影下，AMD 能否有惊喜？

The core logic of this round of bull market in the US stock market is the expectation of interest rate cuts and the AI revolution, with NVIDIA being the core of the core. Previously, AMD was also driven up, making AMD's AI GPU business the most concerned by the market.

During this recent decline in the US stock market, AMD experienced a significant drop, with cumulative declines of 19% in March and April, while NVIDIA surged by 14% in March and only dropped by 2.9% in April, making it one of the best-performing AI stocks.

AMD is set to announce its first-quarter 2024 results after the market closes on April 30th Eastern Time. Wall Street analysts expect AMD's first-quarter revenue to be $5.42 billion, a year-on-year increase of 1.2%, and earnings per share to be $0.60, flat compared to the same period last year.

Data Center Business: Can it perform well under the shadow of NVIDIA?

Looking at the business segments, according to Bloomberg's consensus expectations, the most anticipated data center business is expected to achieve $2.307 billion in the first quarter, a year-on-year increase of 78.18% and a sequential increase of 1.09%.

In addition, the Client Solutions Division is expected to achieve revenue of $1.288 billion, a year-on-year increase of 74.35% but a sequential decrease of 11.81%; the Gaming Business is expected to achieve revenue of $965 million, a year-on-year decrease of 45.05% and a sequential decrease of 29.42%; the Embedded Business is expected to achieve revenue of $923 million, a year-on-year decrease of 40.94% and a sequential decrease of 12.72%.

In the previous quarter's performance, AMD expected data center GPU revenue for 2024 to be $3.5 billion, compared to $2 billion in 2023.

However, after the release of AMD's last quarter's financial report, AMD's stock price dropped by 6% in after-hours trading because although AMD raised expectations, it fell far short of market expectations. The US investment bank Wedbush previously estimated that this figure could be as high as $8 billion.

Under NVIDIA's impressive data center business, AMD appears lackluster.

Goldman Sachs previously estimated that the Q1 earnings per share of the top 10 companies in the S&P 500 index are expected to increase by 32%. Among them, NVIDIA is the fastest-growing, with an EPS year-on-year increase of over 400%:

It is worth noting that at Google Cloud's annual technology conference earlier this month, Mark Lohmeyer, Vice President of Google Cloud and General Manager of Artificial Intelligence Infrastructure, stated that Google currently only needs NVIDIA GPUs and its self-developed TPU to meet AI workloads.

In addition to Google, Amazon AWS also does not use AMD products. An AWS executive previously stated in a media interview that AWS mainly uses NVIDIA GPUs and Amazon's self-developed AI chips Trainium and Inferentia.

Losing Google and Amazon, two major customers, is also one of the important reasons why AMD's AI business has not met market expectations However, AMD has previously stated that it is collaborating with Microsoft, Oracle, and Meta to install the latest GPUs in their data centers.

How do Wall Street analysts view this?

Citi pointed out that the first quarter is traditionally a slow season for the chip industry, and the overall performance of the semiconductor industry in the first quarter is expected to be relatively flat, with a seasonal growth expected to resume in the second quarter. Nevertheless, the bank still maintains a "buy" rating on AMD and reiterates a target price of $192, citing expectations of strong performance driven by AMD's increased market share in servers in the second half of this year and the ramp-up of the MI300 chip.

As one of the leading semiconductor companies, AMD's performance will also be affected by the industry's slow season. Currently, investors are mainly concerned about whether Microsoft will cut back on the deployment of AMD's new generation AI/HPC accelerator, the MI300X:

We expect AMD's revenue in Q1 2024 to be $5.4 billion (a decrease of 12% QoQ), in line with market expectations. Due to higher taxes, we expect earnings per share for the first quarter of 2024 to be $0.39, slightly lower than the market consensus of $0.40.

Due to increased game sales (accounting for 27% of 2023 revenue), we anticipate AMD to guide its revenue for Q2 2024 to $6 billion (an increase of 11% QoQ), higher than the market consensus of $5.64 billion (an increase of 4% QoQ). With higher sales and gross margins, we expect earnings per share for Q2 2024 to be $0.55, higher than the market consensus of $0.50.

Demand for AMD's MI300 chip remains strong, and even if Microsoft reduces orders, they will be filled by other customers. However, negative market expectations may still pressure AMD in the first quarter.

Analysts at Wells Fargo believe that the market needs to pay attention to the cooperation between AMD and Microsoft, as well as the significant commercial value brought by the MI300X. At the same time, with a stable partnership established with Samsung, while giving a "hold" rating, the bank has set a target price of $190 for AMD.

TD Cowen has raised AMD's target price from $185 to $200 and maintains a buy rating on the stock. Analysts predict,

The first quarter will show strong growth momentum in the data center business, while other business areas may face some weakness. The bank also forecasts that by 2027, AMD's earnings per share are expected to exceed $10, indicating an annual growth rate of close to 40% from 2023 onwards.

Furthermore, the bank has raised its forecast for AMD's 2024 MI300 revenue from $4 billion to $4.5 billion, noting that this growth trend is expected to continue due to the faster-than-expected growth of several key customers.

Based on these positive factors, AMD remains on TD Cowen's top stock list.

Deutsche Bank stated,

Due to the "advantages" of AMD's data center and artificial intelligence sectors being offset by the ongoing cyclical challenges in the client, gaming, and embedded businesses, the company's fundamentals are expected to show a "polarization" phenomenon

The most anticipated market event this quarter is the update on the 2024 revenue guidance for MI300 by the company.

Despite a recent pullback in AMD's stock price due to waning market enthusiasm for artificial intelligence in the past few weeks, the current valuation of the stock remains reasonable.

HSBC recently upgraded AMD's stock rating from "Hold" to "Buy" and raised the target price from $180 to $225. The bank believes that,

The market has already reevaluated the revenue expectations for AMD in 2024 and 2025 MI300. Nevertheless, the bank believes that AMD has sufficient supply capabilities and market demand, potentially surpassing the company management's forecast for AI revenue.

Furthermore, analysts mentioned that AMD's next-generation AI GPU will directly compete with NVIDIA's GB200 in 2025. HSBC believes that at the current stock price levels, AMD's stock offers an attractive risk/reward ratio.

However, Erste Group downgraded AMD's rating from "Buy" to "Hold." Analysts told investors that,

AMD's valuation is "significantly higher than peers' price-to-earnings ratios," as well as compared to "stronger competitors" like NVIDIA. The company added that the upside potential for AMD currently "seems limited."

Target Prices

Since February, the target prices from various major banks are as follows: