AMD's Big Bet to Go Beyond PC Chips Has "Got Very Well", Says CEO
Advanced Micro Devices (AMD) CEO Lisa Su believes the chip designer’s acquisition of blockbuster Xilinx has gone according to plan since it closed in February, with more upside on the horizon. The purchase of Xilinx helped AMD further diversify its business outside of personal computers, significantly bolstering the company’s ability to help industries such as aerospace, automotive and telecommunications. This adds to AMD’s multi-year push around the data center, a central reason why we like the company’s long-term outlook despite our more cautious view of chip stocks at present. “Things went very well. Our acquisition thesis went exactly as we hoped,” Su said in an interview with CNBC on Wednesday, a day after holding company Club announced its third-quarter results. in a difficult macroeconomic environment for semiconductor companies. Earnings were slightly weaker than analysts expected, although AMD reported disappointing preliminary numbers in early October. Although below estimates, third-quarter revenue rose 29% to $5.57 billion. AMD expects fourth-quarter revenue of about $5.5 billion to be roughly flat quarter over quarter. The only two segments where AMD sees revenue increase sequentially in the fourth quarter are data centers and what it calls “embedded,” which houses Xilnix’s sales in the aforementioned industries and others such as defense. In contrast, management expects AMD’s traditional end markets – PCs and games, primarily on the graphics card side – to see further weakness in the fourth quarter compared to the third. This demonstrates how the company’s diversification strategy can work during cyclical downturns, which the semiconductor industry is known to experience from time to time. Its newest areas of focus – data centers and embedded – are holding up for now while there are weaknesses in parts of the company’s consumer-focused end markets. While it’s unclear when these tough times in the chip industry will end, Su told Jim Cramer that the AMD-Xilinx pairing has the potential to get even better through IP synergies. After all, it’s been less than a year since companies started sharing one roof. “Thanks to the Xilinx wallet, we were able to help accelerate the growth of this [embedded] company when you look at the supply chain and all the demand for those products. It worked really well,” Su said. “I’m actually even more excited about what we’ll see in the future as we integrate some of our products with AMD processor IP with some of the Xilinx AI and other acceleration IPs. . We think it will be a fantastic portfolio.” So far, AMD’s data center business has proven “relatively resilient” in the face of economic headwinds, Su said, growing 45% from year-over-year to reach $1.6 billion in Q3. In Q2, data center revenue was $1.5 billion, up 83% from 2021. As mentioned, AMD expects data center revenue in its current fourth quarter to exceed the $1.6 billion it generated in the three months ended Sept. 24. AMD is gearing up to unveil its latest data center chip next week, called Genoa, under the company’s Epyc server processor brand, a notable development in the company’s market share battle with Intel (INTC) because under Su’s leadership, AMD has attempted to be consistent t in delivering product innovations to market. Intel’s next-generation data center chip, called Sapphire Rapids, has suffered delays and is now expected to launch next year. In recent years, AMD has taken advantage of Intel missteps. AMD has started shipping a few sets of Genoa chips to “select customers,” Su said during Tuesday night’s earnings call. Production ramps up in the fourth quarter. “I think [Genoa] continues to give us strength in cloud data centers, as well as in the enterprise,” Su told CNBC on Wednesday. “What we’re seeing here is that we’re really extending our lead when it comes to no just performance, but also the importance of power efficiency, especially today when energy prices are rising all over the world.” It should also be noted that while US restrictions on some chip sales end to China have hurt semiconductor companies like Nvidia (NVDA), AMD reiterated on its post-earnings conference call Tuesday night that these rule changes won’t be material to its business. something AMD said when the government’s export measures were first revealed in late August.(Jim Cramer’s Charitable Trust is long AMD. See here for a full list of actions.) As CNBC Subscriber Investing Club has With Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Lisa Su, President and CEO of AMD
David A. Grogan | CNBC
Advanced micro-systems (AMD) CEO Lisa Su believes the chip designer’s acquisition of blockbuster Xilinx has gone according to plan since it closed in February, with more upside on the horizon.
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