Computer chipmaker Advanced Micro Devices Inc. today warned that it’s likely to miss its third quarter sales projections by more than $1 billion, stoking concerns over the stuttering market for semiconductors and sending its stock down. AMD’s stock fell more than 4% in the extended trading session, and the drop had a knock-on effect on rivals Intel Corp. and Nvidia Corp., which both lost more than 2%.
“The PC market weakened significantly in the quarter,” said AMD Chief Executive Lisa Su in a statement. She added that macroeconomic conditions were responsible for reducing PC demand lower than expected.
The economy is going down the pan amid high inflation, while the reopening of schools and offices mean people are no longer as interested in buying PCs as they were during the COVID-19 pandemic. Chipmakers are also feeling the sting from ongoing COVID concerns in China, which remains a key market. The Ukraine war has also worsened supply problems and the economy, reducing demand further.
AMD is only the latest chipmaker to warn that its business is suffering. Last week, Micron Technology Inc. warned investors it is facing a rocky road ahead, saying it would slash its capital expenditure by around a third to ensure it remains profitable. Intel and Nvidia have both also said they’re expecting much lower revenues in their current quarters. Meanwhile, the Philadelphia Semiconductor Index, which tracks the price of major players in the industry, is down 36.4% this year, having risen more than 40% in the year prior.
AMD said it’s now expecting third quarter revenue of just $5.6 billion, way down from its previous forecast of $6.7 billion – an estimate that was already lower than Wall Street’s expectations. The $5.6 billion revenue forecast is down 15% from the prior quarter.
AMD also expects its gross margins to fall to just 50%, down from a previous expectation of 54%. The company said this is due to lower revenue as a result of reduced client processor unit shipments and average sales prices, as well as around $160 million of inventory, pricing and related charges involving PC chips.
Client computing revenue, which includes chips for personal computers, is forecast to come to just $1 billion, down 40% from a year earlier. However, AMD is still growing in terms of its projected gaming revenue. The company is looking at $1.6 billion in sales from that business, which would be up 14% from a year ago. Data center revenue, which is also estimated at $1.6 billion, will grow more than 45%.
AMD is expected to report its third-quarter earnings in full on Nov. 1, followed by a conference call to discuss the results.