AMD is down 9% after reporting earnings. Here's why

Chip manufacturer Advanced Micro Devices (AMD) experienced a significant 9% drop in premarket trading on Wednesday, following a quarterly forecast that fell short of some analysts' predictions. For the fourth quarter, AMD reported revenues of $10.27 billion, surpassing the consensus estimate of $9.67 billion from LSEG. Looking ahead, AMD anticipates first-quarter revenues of approximately $9.8 billion, with a potential variance of $300 million. This projection exceeds analysts' expectations of $9.38 billion; however, many had hoped for even stronger guidance, particularly given the ongoing surge in demand for processors essential for artificial intelligence applications. Chris Rolland from Susquehanna shared insights during CNBC's 'Closing Bell Overtime,' noting that initial expectations for AMD were exceptionally high. He pointed out that the unexpected inclusion of Chinese revenue in the quarterly results contributed to a perception that the earnings beat was less significant than anticipated. Despite the disappointing forecast, Rolland emphasized that demand for AMD's chips in data centers remains robust, and the company hinted at potential multi-gigawatt contracts in the pipeline. In a noteworthy development, AMD secured a partnership with OpenAI in October, which may lead to OpenAI acquiring a 10% stake in AMD. This agreement outlines the deployment of 6 gigawatts of AMD's Instinct graphics processing units over several years, starting with an initial rollout of 1 gigawatt of chips slated for the latter half of 2026. Additionally, Oracle announced intentions to implement 50,000 of AMD's AI chips starting later this year.