AMD & Super Micro: Chip Stocks Plunge Amid Earnings Disappointment, Ripple Effects on AI Sector
AMD and Super Micro Computer, two prominent chip stocks, experienced a significant decline in their share prices as their earnings fell short of expectations. This disappointing news led to a selloff in the chip sector, which had previously seen a surge in investor interest due to optimism surrounding artificial intelligence (AI) technology.
The company's forecast of $4 billion in AI chip sales for 2024 failed to meet the high expectations set by Wall Street investors, who had been impressed by larger rival Nvidia's optimistic forecasts over the past year.
Super Micro Computer, whose stock had soared by 150% this year, even surpassing Nvidia's gains, experienced a decline of over 16% after its third-quarter revenue missed estimates. Concerns were raised about the profitability of the company's new line of servers, further contributing to the negative sentiment surrounding the stock.
The Philadelphia Semiconductor index, which tracks the performance of chip stocks, also took a hit, tumbling by 3.5%. Other major players in the industry, such as Nvidia, Micron Technology, and Marvell Technology, also saw their stock prices decline by 5.7%, 2.9%, and 3.6% respectively.
Russell Hackmann, president of Hackmann Wealth Partners, commented on the situation, stating, "As the market is shifting more towards risk-off over the last couple of days, it's not shocking that unless these companies are beating earnings by a mile that some of the hot air is coming out of them for now." This suggests that the recent market trend has led investors to become more cautious and less willing to tolerate underwhelming earnings reports.
Executives from both AMD and Super Micro Computer cited supply constraints as a major hindrance to their ability to meet the growing demand for AI equipment. The companies are struggling to keep up with the rapid ramp-up of their AI chip production, which is putting strain on the supply chain. However, they remain optimistic about the increasing customer engagement and demand for their AI chips and future products.
Despite the disappointing earnings, some analysts still maintain a positive outlook on AMD. They believe that as supply chain constraints ease, the company will be able to capture a larger share of the AI chip market, potentially leading to significant revenue growth. However, at least 10 analysts have lowered their price target on AMD, while eight have raised their view. Super Micro Computer has also seen mixed opinions, with three price target increases and two cuts.
In addition to the decline in AMD and Super Micro Computer's stock prices, suppliers to tech giant Apple, Qualcomm, and Qorvo, also experienced a drop in their share prices ahead of their quarterly reports.
AMD and Super Micro Computer experience significant decline in stock prices as earnings fall short
Disappointing forecasts for AI chip sales contribute to negative sentiment
Supply constraints hamper companies' ability to meet demand for AI equipment
Source: REUTERS