AMD earnings: Here's what's needed to keep the stock rally going

By Britney Nguyen

When AMD reports earnings Tuesday, investors will be looking far beyond the latest quarter for clues about the MI450 series

AMD's stock rose 58% in October alone.

Wall Street is seemingly confident that Advanced Micro Devices Inc. will deliver upbeat third-quarter results for its non-artificial-intelligence business. Its AI business, however, could be a different story.

The chip maker's stock (AMD) rallied in October on the back of a multiyear agreement with AI leader OpenAI, and the next catalysts for AMD shares could come from earnings on Tuesday and an analyst day later this month. But demand for AMD's graphics processing units going into its Tuesday earnings report looks merely "fine," according to Morgan Stanley's Joseph Moore, and he's "not looking for near-term upside" in that segment.

See more: AMD's stock just had its best month in a quarter-century. What's next?

Additionally, while Moore sees "meaningful" growth in demand for AMD's GPUs in the third and fourth quarters as it "ramps new instances" - including expectations for Amazon.com Inc. (AMZN) to start deploying AMD's Instinct MI355 series of accelerators later this year - there will be "more selective purchasing for GPUs going forward," Moore said, driven by factors such as tight memory-chip supply and Nvidia Corp. (NVDA) resolving issues with its Blackwell AI platform. Moore noted "industry reports" that demand for Nvidia's Hopper chips and AMD's MI355, which it introduced in June, are "a little bit weaker."

AMD's upcoming MI450 series and first rack-scale offering, Helios, which are both slated to launch in the second half of next year, are "the key" for investors, Moore said. The first gigawatt of OpenAI's deployment with AMD will be powered by MI450 and Helios, and is expected to start in the latter part of 2026.

"It's still early to make market-share assessments," Moore said, adding that while AMD's deal to deploy six gigawatts' worth of its systems with OpenAI "is clearly an accelerant," there is still uncertainty as AMD and OpenAI will have to rely on other cloud providers to ramp the rollout.

"Ultimately, to drive share gains, the company will need to provide better [return on investment] than [Nvidia] can offer, and customers still raise questions about that given lower rack density and the need to resolve ecosystem issues," Moore said.

Read: Here's what the OpenAI-AMD deal says about Nvidia

While Moore's team still sees the OpenAI partnership as "game changing" - AMD's stock rose 24% on the day of the announcement and is up another 27% since then - that move reflects "too much optimism over areas such as [Chip-on-Wafer-on-Substrate] builds, which have shown multiple times to be less than fully predictive." That refers to the advanced chip packaging technology developed by Taiwan Semiconductor Manufacturing Co. (TW:2330).

Still, the Morgan Stanley team is expecting "a good quarter" and an upbeat outlook from management going into AMD's analyst day, when Moore will be seeking "important proof points around MI450."

"The tide is rising quickly, and all boats in AI will rise with it, but growth disproportionately coming from non-GPU could cap the multiple after the recent run-up," Moore said, keeping an equal weight rating on AMD's stock, and adding that he prefers Nvidia's stock.

Anticipation for MI450 and Helios could be coming at the cost of MI355x, as customers seem to be pausing those orders, UBS's Timothy Arcuri said, citing recent calls with experts. And while "AMD is making progress" with its ROCm software stack for programming its GPUs, feedback on the offering is mixed, he said in a note last week.

In Arcuri's view, AMD's GPUs also face a challenge from application specific-integrated circuits, or ASICs, which are custom-built chips that handle certain AI tasks.

"We continue to get the sense that many hyperscalers - especially [Microsoft] - are balancing ASIC ramp with AMD merchant GPU adoption and recently things seem to have tilted in favor of ASIC," Arcuri said.

While some experts are touting ASICs for inference, or the process of running AI models after training, Arcuri's team is "mindful that this could all very well change with the [OpenAI] deal potentially catalyzing other customers to increase their engagement." Nonetheless, the analysts see upside for custom chip makers Broadcom Inc. (AVGO) and Marvell Technology Inc. (MRVL).

With AMD expected to book $6.5 billion in data-center GPU revenue this year, the UBS team said they "still think there is enough interest" for that number to grow to $14 billion in 2026. The analysts are modeling AMD's data-center AI chip segment "to double again" the following year, mostly due to its partnership with OpenAI.

Going into AMD's third-quarter earnings report, Arcuri said the company's setup is "challenged by the recent outperformance" of its stock. And AMD could "hold off on big news" until its analyst day later this month, he added.

AMD is expected to report revenue of $8.8 billion and adjusted earnings of $1.17 per share for the September quarter, according to the FactSet consensus. The company's data-center server and AI segments are expected to deliver $2.4 billion and $1.7 billion in revenue, respectively.

For the current quarter, analysts tracked by FactSet are looking for $9.2 billion in revenue and adjusted earnings of $1.32 per share.

-Britney Nguyen

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11-03-25 1646ET