AMD Stock Slips, but Analysts See Bright Future in AI Chip Market

Writing Time: August 06, 2025, 14:45 (U.S. Eastern Time)

Advanced Micro Devices (AMD) saw its stock decline following its latest earnings report, despite beating overall market expectations. While short-term data center results were mixed, analysts remain confident in AMD’s long-term potential in the fast-growing artificial intelligence (AI) processor market, predicting significant revenue opportunities over the next few years.

AMD Faces Short-Term Setback, Long-Term Opportunity

Advanced Micro Devices Inc. (NASDAQ: AMD) reported stronger-than-expected quarterly results on Tuesday, yet the stock dropped nearly 8% as investors reacted to softer-than-hoped-for data center performance. AMD’s data center revenue met consensus forecasts, signaling that AI was not the primary driver of the company’s recent growth.

Shares fell 5% in premarket trading Wednesday, with Melius Research analyst Ben Reitzes attributing part of the decline to uncertainty around AMD’s graphics processing unit (GPU) sales in China.

The company issued third-quarter revenue guidance of $8.7 billion, plus or minus $300 million — a figure above Wall Street expectations. However, the forecast did not include potential shipments of AMD’s Instinct MI308 GPUs to China, as the company awaits U.S. government licenses following an April export restriction on the product.

China Licensing Could Unlock Billions in GPU Sales

Melius Research believes that once AMD receives export clearance for the MI308 in China, its GPU sales could quickly ramp up. The firm estimates the company could achieve a $3 billion quarterly revenue run rate from GPU sales in China alone.

If such momentum builds by the end of the fourth quarter, analysts say it could signal meaningful upside for 2026 GPU revenue projections, which are currently estimated in the mid–teens billions.

AI Strategy Gains Traction with New Products

Despite near-term headwinds, analysts remain optimistic about AMD’s AI roadmap. The company recently began shipping its Instinct MI355 AI accelerators, with production starting in June.

AMD Chief Executive Officer Lisa Su said during the earnings call that customer demand for the MI355 has been “really positive,” adding that the company is “bullish” on both the product and the broader AI opportunity.

According to Melius Research, if AMD achieves its goal of generating tens of billions of dollars annually from AI-related sales, its earnings per share could rise to $9 annually over the long term. The firm also sees potential upside as AMD wins over major customers such as OpenAI and Oracle Corp. (NYSE: ORCL).

Next-Generation MI400 Expected to Boost AI Momentum

Looking ahead, AMD plans to launch a rack-scale solution featuring its MI400 accelerators in 2026. Raymond James analysts noted that this product could further accelerate AMD’s AI momentum, particularly in high-performance computing environments.

They also highlighted the company’s central processing units (CPUs) for servers as a bright spot in its portfolio, despite intensifying market competition.

“Limited near-term data center upside notwithstanding, we believe a 10–20% AI GPU market share is achievable for AMD over the long term,” the Raymond James team wrote, adding that such growth could support double-digit annual revenue gains for the next two to three years.

Competition with Nvidia Remains Fierce

Nvidia Corp. (NASDAQ: NVDA) currently dominates the AI GPU market, with a commanding lead in both hardware and software ecosystems. However, AMD’s expanding AI product lineup, competitive pricing, and partnerships with major enterprise customers are positioning it as a credible challenger.

Jefferies analysts said in a Tuesday note that while AMD’s AI outlook “didn’t show the sort of upside some investors were looking for,” the $3.5 billion to $4 billion revenue opportunity for the MI355 in the second half of 2025 remains intact.

The firm added that it is looking for “further clarity” on AMD’s progress in AI adoption before taking a more bullish stance.

Investor Takeaway

While AMD’s latest earnings reveal some short-term hurdles — particularly in the data center segment — analysts see the company as well-positioned for long-term growth in the AI GPU market.

If export approvals for China come through and upcoming products such as the MI400 gain traction, AMD could significantly expand its market share in a sector projected to grow rapidly through the decade.

For investors, current price weakness may present a buying opportunity for those with confidence in AMD’s long-term AI strategy.

Source: Market Watch – AMD’s stock is down, but these new estimates have analysts feeling upbeat