When Advanced Micro Devices (NASDAQ: AMD) reported its first-quarter results recently, it gave a glimpse into why some investors remain excited about the stock’s prospects despite its poor performance over the past year. As of this writing, the stock is down about 35% during that span.
This excitement stems from the revenue growth the company is seeing in its data center segment, where sales soared 57% to $3.7 billion. While that revenue is a fraction of what rival Nvidia (NASDAQ: NVDA) generates, the growth is nonetheless robust. AMD credited its strong data center growth to its continued central processing unit (CPU) server share gains and robust growth from its Instinct graphics processing units (GPUs).
AMD has recently become the leader in the data center CPU space. While GPUs provide the power, CPUs are the brains behind the operations. The market is not nearly as big as the one for GPUs in the data center space, but it’s still an important and growing market. In the quarter, several cloud computing providers started to offer new computing options based on AMD’s latest EPYC chips. Its CPUs also saw strong growth in the enterprise segment.
AMD saw several hyperscalers (owners of massive data centers) expand their use of its GPUs for generative artificial intelligence (AI) tasks, such as AI search, rankings, and recommendations. It also said that one of the largest AI model companies is now using its GPUs to run a significant portion of its daily inference traffic. It added that big tech companies and AI start-ups are also now using its GPUs to help train their next-gen AI models.
While AMD is unlikely to overtake Nvidia anytime soon, it’s still seeing strong growth and solid progress in the data center space. Meanwhile, while the AI training market has been the early focus of companies as they race to build better AI models, the inference market is eventually expected to become exponentially larger. AMD has always competed better in the inference market, so this eventual shift should be a big positive for the company.
While AMD’s data center growth in the quarter was a highlight, not everything was coming up roses for the company. It said that it would lose out on around $700 million in revenue in the second quarter due to new export controls that would affect its MI308 GPU shipments to China. For the full year, it expects the export restriction to be a $1.5 billion headwind, with most of the effect in the second and third quarters.
