The Six Five team discusses AMD Q2CY24 earnings.
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Transcript:
Daniel Newman: I think my comment when AMD hit was I said finally a print that the street likes. There was finally a print that, it was the same day I think as Microsoft went, and everybody was just throwing up on Microsoft. But it was all about CapEx. Now, Satya got on the call, we’ll talk about Satya later, and he kind of recovered a lot of the ground over the course of his call, but AMD, two numbers. So Intel had a 9% growth in client and AMD grew like five times faster in client. So market share gains there, strength in their numbers there. The data center number was huge, and we all know why that is. It’s instinct. I mean Nvidia is the champion, undisputed, but there is a number two and number two in the GPU space is AMD.
And so AMD, while there’s still some questions on ROCm, questions on the software stack, are people going to use this? There is demand for this. And whether it’s been some of these AI clouds that are building up around it, whether it’s some of these, what I would call the hedges that are being made by the hyperscale cloud providers, not the AI cloud, not the Lambda Labs kind of things, but the actual AI cloud, so the AWS’s and the Microsoft, which is where a lot of the AMD is supposed to land, they need an alternative. They really do. The Tom Toms on the streets that I’m hearing is look, everybody knows they have to be, behold it to NVIDIA in many ways. And it’s the champion, undisputed on the product, on the software, on the stack, on the libraries. Having said that, they’re all feeling a little bit of the pinch, the margin control, the deal flow, that they just don’t have enough control.
And so AMD is a very logical second choice. There’s a solid roadmap. Can I say I hate the, I hate the 325 and 50 and just, my mind cannot wrap around those numbers. But there’s a roadmap, there’s clarity of a cadence. So in the data center, there’s an absolute strength there. The growth is there, the numbers are there, the margins are there, the customers seem to be there and there’s no one else. Your point about the 500 million, our market forecast shows about the same thing, 300 million last year, about 500 million on Gaudi this year. And so AMD’s got that momentum and no one else is there to compete with it. So the trajectory they’re showing and they’re on is good. So a lot to like. I won’t even touch gaming, that’s been pretty beat up. But that has more to do with where does that industry go? Where’s that going longer term. So I’m going to pass the mic here. You heard my initial comments.
Stacy Rasgon: Yeah, AMD’s quarter was decent. I will say the stock was about 140 when they printed and it was up after the print. I think if it had been at 180, which is where it was three or four weeks ago, I think it would’ve been down, but it wasn’t a bad print. So the expectation had come down. I think on the good side for them, they’re clearly still doing well in their core client and data center businesses and they’re still clearly taking share. And those were all good. And again, they did take their AI guidance up. They went from more than 4 billion for the year to four and a half. Again, I think three or four weeks ago, four and a half would not have been enough. I think where things are now, four and a half at the time at least was enough. So that was all fine. The negatives, and there were a few. Where it would be, look, on the PC side, again, they are significantly over living versus Intel.
Intel’s calling out channel flush out. Again, I’ve been worried about that. I am worried that AMD’s guidance, both their results as well as their guidance, they’re guiding for above seasonal growth for client in the back half on new products. There may be some incremental channel fill that may be incorporated into that guide. I don’t know yet. It sort of depends on the share interplay, but it’s something to watch, I think. I’d say the is like the embedded business in gaming are quite bad, still. Embedded its kind of bottomed, but the recovery isn’t as good as they thought. So numbers next year actually had to come down because as well as their OpEx going up, although I’m not going to knock them for OpEx again. Compare and contrast with Intel, I think it’s probably good to spend right now if you can. And then finally on the AI guide, the four and a half billion, people believe it’s higher than that. And you have to believe it’s higher because if it’s four and a half, we already know what they did in Q2, you can kind of ballpark what they’re sort of suggesting for Q3.
It doesn’t leave much room for an exit rate in Q4. So you need to believe it’s higher and it puts more pressure on the expectations for next year because I still think expectations, well, again after the blood bath, I don’t know, but expectations were for them to do solidly double digits in AI revenues. And so double-digit building in AI revenues. You need a good exit rate coming out of this year. So those are the things I think to watch. But objectively, by the way, in this set of guides, we’ve had a lot of semi-prints so far. There haven’t been a lot of good ones. This was more on the better side of the spectrum of what we’ve seen I would say so far during the season.
Patrick Moorhead: Yeah, good analysis guys. And I guess it’s interesting, in December I said that their AI number would be 6 billion. Just looking at the puts and the takes.
Stacy Rasgon: I could be wrong, but I feel like if it was going to be six, they could have said that they would do more than five.
Patrick Moorhead: See, that’s not Lisa though. That is not the way that Lisa Su rolls. I think the way that she wants…
Stacy Rasgon: Swinging before, so I don’t know, but you know her better than I do probably.
Patrick Moorhead: Well, it’s just I look at, look at the itty bitty numbers that came out and it’s this trickle in the way that they want to bring that out. I mean, we went from a number in December to January and then end of Q. So anyways, that’s kind of where, I mean, again, I don’t get paid to hit the exact number, but calling that it seemed reasonable to me that they could hit that and the only governor would be TSMC, which is the industry’s governor.
Stacy Rasgon: Yeah, I mean for what it’s worth, we’re modeling, I’m at five this year and nine next year, and I think 11 in 2026. So could be more.
Patrick Moorhead: You’re safe, you’re safe with five I think for sure.
Stacy Rasgon: We’re at five right now for this year.
Patrick Moorhead: Yeah, absolutely. And with all the downstream FOMO from all the hyperscalers, it’s going to happen. So it’s interesting on embedded in gaming, I like to look at self-inflicted wounds and market inflicted wounds and on gaming. I mean it is absolutely a challenge, with the exception, I do believe there will be new consoles that will come out. We’re in the fifth year of that. What’s a mystery to me is, are gaming, the gaming cards where Nvidia is an absolute juggernaut.
Stacy Rasgon: Right? Yeah.
Patrick Moorhead: Juggernaut there and embedded, listen, look at Altera, look at Lattice. They’re both down.
Stacy Rasgon: They were all over earning during Covid and it’s inventories. And look, auto and industrial markets in general right now are not great. Com infrastructure is not great, and they were all over shipping and over earning less so, there’s a bunch you have to work off.
Patrick Moorhead: Exactly.
Stacy Rasgon: It does look like it’s bottom, at least they’re looking for growth in the back half. Again, they weren’t less, they’re kind of suggesting single digit sequential for the rest of the year. I think a quarter ago they were suggesting could be double-digit. Intel’s still suggesting double-digit for Altera right now. Again, I think that’s a mistake.
Patrick Moorhead: Yeah. Final comment that I have on this is that I think AMD needs to be looking very seriously of how they can capitalize on the Intel news. And it used to be with the OEMs that AMD was the risky choice, right? Yeah. Embedded in that is you throttle your volumes and you throttle your volumes and the breadth of this. What AMD needs to really think through is how they can capitalize on this in areas like enterprise PCs and enterprise servers. This is areas where they’ve been traditionally weak and that takes massive marketing and sales investments to get that going.
Stacy Rasgon: By the way, actually talking on the call, on the public call about enterprise server gains, which I know they’ve been talking about forever.
Patrick Moorhead: Yes.
Stacy Rasgon: It sounded like they felt that they were a little more real now and again, I think they said something like a third of our new wind, which is not revenue yet, takes time. They said something like a third of our new winds are new enterprise customers that we’ve never sold to before. So I don’t know how big that is, but they were talking about it more than maybe they usually do.
Patrick Moorhead: Yeah. And what you’ll do is you’ll see that inside of numbers for Dell and HPE and Lenovo.
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.
