The Six Five team discusses AMD’s latest earnings release.
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Transcript:
Patrick Moorhead: Net, net AMD had they beat on EPS and they met on revenue. They had some pretty big declines in their revenue, but it was really expected. And the story here is big revenue declines on PC. You can’t have your client computing business more than a 54% reduction there and there was a reduction in data center and come out fine. But you know what? People are pretty psyched about the whole future potential of AI. People need to be careful. Some of the comments that came out I think were positive, but there was a big ramp in the future upcoming for El Capitan.
And there are going to be some cloud wins, but I think it’s important for people not to get too ahead of their skis on AMD and AI. I’m really positive about their capabilities as I wrote, but it’s really going to be more about, I would say even more of the back half of 2024 where we would see something meaningful around these discreet cards really making a run. AMD is seeing just a tremendous amount of interest for its Instinct cards and paired up with Epic processors is really a great one, two punch. You add the Xilinx business, which again, that really helped the company this quarter, gave them huge growth there. But that’s exactly one of the reasons they bought the business, was to get out of these client up and down, data center up and down and let’s get to an embedded business– that might take a long time.
It’s a lot harder to realize revenue soon, but once you get those designs, it’s going to keep paying dividends for a long time. I was also pretty happy to see that, on gaming, I expected a much steeper decline in their gaming market, but they only saw a 4% decline. And I think really based on the back of the consoles that are out there that this is where the preload for the consoles that are going to blow out in the fourth quarter. They obviously have to get them into the factories before. And I think this is exactly what we’re seeing. Really interested to see how AMD plays the supply game between consumer GPUs and data center GPUs. That’s going to be a really interesting one to watch. I’m hearing a lot of rumblings that Nvidia is making a lot of shift in its wafers from consumer to data center where if you look at the profit dollar per square millimeter of one of these wafers, they can make a heck of a lot of money in AI than they can in the consumer market. Overall, met my expectations.
Daniel Newman: I like your last point. These companies have to look at maximizing every millimeter, the amount of yield is limited. There’s supply manufacturing limitations they’ve got… They’re fabless so they’ve benefited from that, but they still have to when they make changes, that takes time. Anytime they change what they want to manufacture. If they’re deciding how they’re going to move from more consumer to more enterprise with AI, that’s going to have an impact. Now the beauty for I think in Nvidia here is they have so much margin power right now. If they start limiting supply on consumer GPUs, they’ll probably be able to raise prices to offset it. Am I wrong though?
Patrick Moorhead: I think that’s exactly where we’re headed and we’re about a year after the crypto boom. Nvidia’s numbers have to start looking better next quarter or actually in the next week.
Daniel Newman: On the consumer side, even if they make less, they can charge more for it. And then on the enterprise side, I feel like they have, what I would call, infinite pricing power. I think there’s a buyer for everything they can basically produce right now at pretty much any price they choose to sell it for. I don’t know if that’s forever. I think a limiting factor to this GPU market’s going to be whether you could sell those advanced GPUs to China. But of course you see AMD and others are creating special GPUs that are going to meet the requirements or the maximum requirements in these cases to be okay in terms of export controls and they’re going to sell to China.
And the only problem with any decision like that is that the goalposts can keep moving. They can make something that’s supposed to be spec that’s going to be a tuned down spec that’s going to be within the constraints of the export controls and then the rules could change and then that’s no longer going to be shipped. We’re definitely trying to handcuff China, but that’s a little bit off the topic of what’s going on with AMD.
Patrick Moorhead: It’s okay. They can just read my Forbes article on Nvidia and China and AI if they want.
Daniel Newman: Well, don’t pimp yourself, but go ahead and pimp yourself a little bit. But the truth is this, it was a status quo quarter. The company didn’t predict it was going to be a great quarter, it delivered on what it predicted it would do, and it was right on. It was a quarter for AI announcements. Lisa has earned through the success of the company over the last several years, the ability to invigorate its investor base by pointing to the future when the current state isn’t great. The current product portfolio has its customers, has its volume, it’s earned its market share, it’s fighting back and forth on the PC side, but the AI market is where all the growth is.
And I’ve talked to several other CEOs about this and they’re all like, “Look, we’re selling what we’re selling right now. And that’s great, but we have to be focused on one or two, three years into the future because this AI shift is going to fundamentally change what we’re manufacturing, how we’re designing products, how we’re going to market.”
And so AMD is signaling what it’s going to do. And the signal is it intends to be the biggest competitor to Nvidia when it comes to data center GPUs and it’s in a good position to do that. Now, you and I have been… I think we’ve been forthright in saying you can’t rule out Intel, but Intel’s been a little slower coming of age in terms of saying this is the product and when we can ship it, and this is going to be the whole story. AMD has a little bit of a lead here. And so Intel will continue to play catch-up and as we saw Intel’s number, we talked about this last week, Pat’s getting the ship on track. AMD needs to be looking in the windshield, but does need to keep an eye on the rearview mirror, of course. And so as overall, Pat, you covered most, that’s the part I think I wanted to add. And let’s roll on something that’s not earnings, maybe just even for a few minutes.
Patrick Moorhead: Let’s do that. But I do want to get… There’s never a market of one.
Daniel Newman: Shouldn’t be. Hope not.
Patrick Moorhead: And AMD and Intel are both going to get a piece. The only question is, how much?
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
