AMD - AMD leads chips lower on weak Q3 forecast investors await Qualcomm results

2023-08-02 12:33:36 ET

Semiconductor stocks sank on Wednesday amid concerns about AMD's ( NASDAQ: AMD ) third-quarter forecast, despite some praise from Wall Street.

Led by CEO Dr. Lisa Su, AMD ( AMD ) shares fell more than 8% on heavy volume after the company reported second-quarter results and said third-quarter revenue would be between $5.4B and $6B, with the mid-point below the consensus estimate of $5.85B.

On the earnings call, AMD ( AMD ) management touted its progress made in artificial intelligence, but Wall Streets analysts were mixed in their analysis.

Wedbush analyst Matt Bryson called the results "just okay," citing the weakness in the data center, with guidance seen as "arguably disappointing." However, Bryson, who raised his price target to $155 from $145 following the results, explained that investors may be looking past this as gains start to accelerate later this year and into 2024 and 2025.

KeyBanc Capital Markets analyst John Vinh, who reiterated his overweight rating on AMD ( AMD ), said the quarter was mixed, as servers were weaker because of soft enterprise demand and the continued cannibalization of servers from increased AI spend.

J.P. Morgan analyst Harlan Sur raised his price target to $130 from $92, but kept his neutral rating, noting that the company is still driving "strong execution/innovation" in its compute portfolio as it looks to take 500 basis points of server CPU share this year, largely from Intel ( INTC ). And with the MI300 on the way, the company is poised to take a part of the $150B AI opportunity over the next few years.

Nvidia ( NVDA ), which competes with AMD in the GPU space, fell 5% , while Intel ( INTC ) dropped 4% .

Arm, the British semiconductor design firm owned by Japanese tech conglomerate SoftBank ( OTCPK:SFTBY ), is reportedly targeting an initial public offering worth some $60B that could happen as soon as next month.

The company designs processors for electronics and licenses its technology as intellectual property to several tech companies around the world, including Nvidia ( NVDA ), Apple ( AAPL ), Qualcomm ( NASDAQ: QCOM ) and others.

Qualcomm ( QCOM ) shares fell 1.8% as investors awaited the chip firm's third-quarter results.

Wall Street analysts expect Qualcomm to earn $1.81 per share, while sales are forecast to drop nearly 22% year-over-year to $8.51B.

Qorvo ( NASDAQ: QRVO ) shares fell 3% as the smartphone semiconductor company is also slated to report quarterly results after the close of trading. Wall Street analysts are expecting the company to earn 15 cents per share on $639.73M.

Most other semiconductor stocks were deep in the red on Wednesday, with Texas Instruments ( TXN ), Analog Devices ( ADI ), Micron Technology ( MU ) and NXP Semiconductors ( NXPI ) all down 3% or more .

Broadcom ( AVGO ), Microchip Technology ( MCHP ) and ON Semiconductor ( ON ) also saw heavy losses.

More on semiconductor earnings

• Qualcomm Earnings Look-ahead: Smartphone market in focus, over $8 billion revenue expected
• Inside AMD: Revenue stabilizes for Data Center, Client segments
• AMD: Consider Selling The Q2 Report (Rating Downgrade)

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