AMD Faces New Export Challenges Amid AI Chip Restrictions

Advanced Micro Devices (AMD) chips, including the MI308 model, now encounter new licensing requirements for export to China. According to Reuters, these restrictions also impact AMD’s MI308 and NVIDIA (NVDA) H20 artificial intelligence (AI) chips as the United States seeks to maintain a competitive edge in AI technology amidst escalating tariffs and a trade war. In pre-market trading, AMD shares fell approximately 7%, while NVIDIA shares dropped about 6%.

Significance of the Chinese Market

China represents a vital market for both AMD and NVIDIA. In fact, China comprised 24% of AMD’s projected revenues for 2024 and 13% of NVIDIA’s fiscal 2025 revenue. Consequently, these latest export control measures hinder growth in a region where both firms face substantial competition from local players such as Alibaba, Tencent, and ByteDance. Although AMD has not detailed the financial implications of the restrictions, NVIDIA anticipates a charge of $5.5 billion.

Challenges for AMD’s Growth Prospects

These restrictions are likely to pose a significant threat to AMD’s revenue growth in the near term. Throughout this year, AMD stock has faced challenges, losing value amid a technology sector sell-off fueled by recession fears following U.S. President Donald Trump’s decision to impose tariffs on major trading partners, including China, Mexico, and Canada. Worker competition with NVIDIA in the data center and AI chip sectors has further pressured AMD, leading to a year-to-date share drop of 21.2%.

Exploring AMD’s Stock Strategy

Given this landscape, how should investors approach AMD stock? Let’s examine its strategies and offerings.

Can a Strong Portfolio Enhance AMD Stock’s Prospects?

AMD depends heavily on its portfolio, which includes its fifth-generation EPYC Turin, and third- and fourth-generation EPYC processors, as well as Instinct accelerators and the ROCm software suite, to fend off NVIDIA competition, which has seen a 16.5% decline in stock value this year.

AMD Stock Performance

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By 2024, AMD’s Data Center revenues accounted for about 50% of total revenues, experiencing a year-over-year increase of 69% to reach $3.9 billion. The number of EPYC instances surged by 27% in 2024, surpassing 1,000, with major players such as Amazon (AMZN), Alibaba, Alphabet (GOOGL), Microsoft, and Tencent launching over 100 general-purpose AI instances in the last quarter of 2024 alone.

AMD generated more than $5 billion in data center AI revenues in 2024, spurred by the deployment of MI300X chips for companies like Meta Platforms and Microsoft. The demand for AMD Instinct accelerators has surged among several cloud service providers, including IBM and Digital Ocean, and the company projects this trend to continue into 2025. Furthermore, the fifth-generation EPYC processors are currently powering the new Google Cloud C4D and H4D virtual machines, along with Oracle Cloud Infrastructure Compute E6 Standard shapes.

Strategic Partnerships and Acquisitions

A diverse range of partners—including Cisco Systems, IBM, Amazon, Alibaba, Google, Microsoft, Meta Platforms, Dell Technologies, and Tencent—has been crucial for amplifying AMD’s reach in the market.

To strengthen its AI ecosystem and close the gap with NVIDIA, AMD has been actively acquiring companies. For instance, the acquisition of Helsinki-based Silo AI has bolstered its AI development capabilities, while acquiring ZT Systems, which provides AI infrastructure, enables AMD to design and test its next-generation AI silicon and systems effectively.

AMD 2025 Earnings Estimates Diminish

The Zacks Consensus Estimate for AMD’s 2025 earnings stands at $4.59 per share, reflecting a slight decline over the past week, but still indicating a year-over-year growth of 38.67%.

AMD Stock Price and Consensus Estimates

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

Currently, the consensus estimate for 2025 revenues has been set at $31.72 billion, indicating a year-over-year growth of 23.02%. Notably, AMD has exceeded the Zacks Consensus Estimate in each of the past four quarters, with an average surprise of 2.32%.

Concerns Over AMD Stock Valuation

Currently, AMD’s stock appears overvalued, with a Value Score of D indicating that its valuation may be excessive at this time.

The stock is trading at a forward 12-month Price/Sales ratio of 4.6X, which is significantly higher than the Zacks Computer Integrated industry average of 2.84X.

Forward Price/Sales Ratio

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Should You Buy, Sell, or Hold AMD Stock?

Despite AMD’s robust portfolio and strategic acquisitions, significant challenges remain due to fierce competition from NVIDIA, the new export controls, and the stretched valuation.

AMD shares are currently trading below both the 50-day and 200-day moving averages, which signals a bearish trend.

AMD Stock Trading Below Critical Moving Averages

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With a current Zacks Rank of #3 (Hold), it may be prudent for investors to wait for a more advantageous entry point before accumulating AMD stock. You can view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Names Top Semiconductor Stock

One leading semiconductor stock, far smaller than NVIDIA, has seen an increase exceeding +800% since our recommendation. Although NVIDIA continues to perform well, this new top chip stock has substantial growth potential ahead.

With strong earnings growth and a broadening customer base, this stock is positioned to fulfill the surging demand for Artificial Intelligence, Machine Learning, and the Internet of Things. The global semiconductor manufacturing market is expected to grow from $452 billion in 2021 to $803 billion by 2028.

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This article initially published on Zacks Investment Research (zacks.com).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.