Nvidia is chip sector's only hope after AMD and Super Micro disappoint

By Therese Poletti

Nvidia's report is still a month away, a lot of time for more hype and expectations to build

Investors better hope that Nvidia Corp. exceeds Wall Street's current expectations, after Tuesday's disappointments by two other favored AI-related companies, Advanced Micro Devices and Super Micro Computer.

On Tuesday, both AMD (AMD) and Super Micro (SMCI) had disappointing elements in their highly anticipated earnings. Both companies have become hotly traded stocks as AI plays, due to their future and current product offerings, and have become AI darlings on the heels of Nvidia's (NVDA) recent huge success.

But on Tuesday, they led a decline in semiconductor stocks in after-hours trading. Super Micro saw its shares tumble nearly 10%, while AMD dropped 6%, showing how oversized expectations around AI can hurt this sector. Many other semi stocks fell after hours as well, with the Philadelphia Semiconductor Index SOX down nearly 2% after the regular trading day ended.

In AMD's case, the company raised its forecast for revenue from its new AI accelerator-chip family, called the M1300, to above $4 billion this year, up from $3.5 billion previously. AMD Chief Executive Lisa Su also said that the MI300 had become "the fastest ramping product in AMD history, passing $1 billion in total sales in less than two quarters."

Analysts and investors, though, have been bandying about figures ranging from $5 billion to $6 billion as estimates of what AMD could see in 2024, so investors were disappointed by Su's $4 billion-plus forecast.

"Our experts have given us a ceiling of $5 billion AMD's GPU revenue opportunity for 2024," said Third Bridge analyst Lucas Keh, in a note to clients on Tuesday, based on his interviews in the semi industry.

For its part, Super Micro reported fiscal third-quarter revenue of $3.85 billion, up 200% but still shy of expectations for revenue of $3.95 billion, according to FactSet. The company is still seeing huge demand for its servers that are designed to take advantage of AI-compute needs, but it also said that it could not meet all the demand for its products because of component constraints.

While Super Micro did not specify which components are constrained, it is likely it was talking about Nvidia's GPUs. Last quarter, Nvidia said that demand was outpacing its supply of its GPU AI accelerators and it expected that to continue throughout the year.

Nvidia will report its earnings in another month, on May 22. That is a lot of time for investors to get carried away with expectations. Super Micro has surged 202% so far this year, while Nvidia is up 74%. After steadily falling from a peak of around $227 since mid-March, AMD is now only up about 7.4% year to date. These stocks are incredibly volatile, and investors need to remember they can change on a dime.

-Therese Poletti

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-30-24 2114ET

Copyright (c) 2024 Dow Jones & Company, Inc.