Advanced Micro Devices (NASDAQ:AMD) stock had been on a tear lately, riding an AI-driven rally that saw it double in value since early April. But that bullish narrative hit a wall today – despite solid growth in the computing and gaming segments, AMD shares dropped 7% following the company’s latest earnings report.
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At first glance, the Q2 2025 results seemed strong. AMD delivered record quarterly revenue of about $7.7 billion, surpassing consensus estimates of $7.4 billion, fueled by a 32% year-over-year increase led by client CPU and gaming GPU sales. However, a closer look reveals where the cracks began to form.
The company’s Data Center segment – the area most closely tied to the AI investment thesis – grew just 14% year-over-year to $3.2 billion, in line with expectations but underwhelming when compared to Nvidia’s staggering 73% growth in the same area. That comparison likely weighed on sentiment, especially given AMD’s recent stock surge was largely tied to AI hopes.
Furthermore, gross margins were squeezed to 43%, falling short of the 54% level AMD said it could have achieved without the impact of U.S. export restrictions on its MI308 chips.
AMD did issue a stronger-than-expected Q3 revenue forecast of $8.7 billion, topping Wall Street’s $8.32 billion estimate. That guidance excludes any potential revenue from MI308 shipments to China, which remain blocked due to regulatory restrictions.
CEO Dr. Lisa Su remained upbeat, pointing to “significant growth” ahead as the company ramps its next-generation Instinct MI350 GPUs, designed to compete with Nvidia’s Blackwell platform.
However, one top investor, known by the pseudonym Tech Stock Pros, is sounding a note of caution. Ranked among the top 3% of TipRanks’ stock pros, the investor argues that the stock’s intra-quarter run-up has left it vulnerable – and that “the AI story that’s built back up is slowly going to get put to the test.”
The investor takes a deeper dive into the company’s revenues, and points out that much of the engine for growth came from CPU sales, not AI. In other words, there is a big disconnect from the buzzing excitement and the nuts-and-bolts of AMD’s revenues. That’s going to cause some pain as rubber hits the road.
“The stock is pricing in a massive AI growth story comparable to Nvidia’s… heading into Q3, we don’t see this AI growth story holding up… It’s time to count profits, exit the stock, and wait for another round of de-risking to jump back in,” concludes Tech Stock Pros, who is giving AMD a Sell rating. (To watch Tech Stock Pros’ track record, click here)
Overall, AMD stock carries a Moderate Buy consensus rating on Wall Street, based on 25 Buys, 10 Holds, and one Sell. However, the average price target of $161.16 implies the stock may remain range-bound in the near term. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured imvestpr. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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