AMD Projects Fourth Quarter Earnings Will Fall Short Due to Supply Issues

Advanced Micro Devices (NASDAQ:AMD) anticipates that its fourth-quarter revenue will be slightly below market expectations, attributing this decline to supply chain constraints that affect its ability to meet strong demand for artificial intelligence chips. The slower-than-expected growth in the PC market is also cited as a contributing factor. Following this announcement on Tuesday, AMD's stock, despite a roughly 10% increase year-to-date, fell by 5% in extended trading.

The company predicts that its fourth-quarter revenue will be around $7.5 billion, with a potential variance of $300 million. This forecast is below the average analyst estimate of $7.54 billion compiled by LSEG. In contrast, AMD's third-quarter revenue exceeded expectations, coming in at $6.82 billion against a projected $6.71 billion.

The surge in demand for AI chips from major tech firms like Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META) has outstripped the supply capacity of both AMD and its main competitor Nvidia (NASDAQ:NVDA). This mismatch has constrained these chip manufacturers' ability to capitalize on the increasing number of orders.

Additionally, leading contract chip maker TSMC announced in July that its production capacity for AI chips is expected to remain extremely tight at least until 2025. This outlook underscores the significant challenges encountered in the supply of these advanced semiconductor technologies in the near future.