AMD Stock Falls After Earnings. Why Investors Wanted More From AI Chip Maker.

AMD shares are up 47% this year, compared with the 12% gain for the iShares Semiconductor ETF. (Annabelle Chih/Bloomberg)

Advanced Micro Devices reported better-than-expected revenue results Tuesday afternoon. Its shares initially rose on the numbers before reversing lower.

Investors likely wanted more upside after a rally in the stock price over the past three months. The stock pointed 5.4% lower at $164.99 in premarket trading Friday.

The chip maker reported second-quarter adjusted earnings per share of 48 cents, in line with Wall Street’s consensus estimate, according to FactSet. Revenue came in at $7.7 billion, which was above analysts’ expectations of $7.42 billion.

For the current quarter, AMD guided to a revenue range with $8.7 billion at the midpoint, versus analysts’ consensus estimate for $8.32 billion.

“We are seeing robust demand across our computing and AI product portfolio and are well positioned to deliver significant growth in the second half of the year,” AMD CEO Lisa Su said in a press release.

For the June quarter, revenue in AMD’s data-center segment rose by 14% to $3.2 billion versus the prior year.

AMD stock dropped 5.8% at $164.20 in premarket trading following the company’s conference call with investors.

As of Tuesday’s close, AMD shares were up 44% this year with a 73% gain over the last three months. Investors have been growing more optimistic about the AI infrastructure trade as large technology companies have raised their capex spending plans this earnings season.

In June, AMD announced its latest AI chips to compete with Nvidia: the AMD Instinct MI350 series consisting of the MI350X and MI355X.

The AI data-center market has been moving toward “full stack” rack-scale solutions led by Nvidia. In March, AMD closed its acquisition of ZT Systems, giving the company more expertise to design rack-scale AI servers incorporating chips, networking, and software in a larger end-to-end system offering in the future.

On a conference call with analysts and investors, Su said customer interest in the MI400 series slated for release next year is “very strong.”

“We are in the early stages of an industry-wide AI transformation,” she said. It “will drive a step-function increase in compute demand across all of our markets, positioning us for significant revenue and earnings growth over the coming years.”

Write to Tae Kim at tae.kim@barrons.com