AMD stock still looks expensive heading into its critical third-quarter earnings report.
AMD stock still looks expensive heading into its critical third-quarter earnings report.
Recent events suggest funding is getting harder to come by for some artificial intelligence (AI) companies. Two weeks ago, Australian data center company, Firmus, cancelled its initial public offering (IPO) due to a lack of investor demand. Moreover, financing costs are soaring for data center operators like CoreWeave. To top things off, Anthropic could face a $500 billion reduction to its expected valuation when it eventually goes public.
This is all bad news for the semiconductor industry, because it could reduce demand for data center chips and components. As a result, Advanced Micro Devices (AMD -0.61%) stock plunged by 13% last week alone, as investors started pricing in a potential slowdown in sales growth.
But AMD is scheduled to release its operating results for the third quarter of 2026 (ended Sept. 30) after the market closes on Nov. 3, and if the company puts some of the recent concerns to bed, its stock could stage a powerful recovery. So, should investors buy the recent dip ahead of the report?
AMD faces explosive demand, but will it last?
AMD launched its first data center graphics processing unit (GPU) for AI workloads in 2023, and it was called the MI300X. It wasn't quite as powerful as Nvidia's (NVDA -0.29%) original H100 GPU, but customers like Oracle, Microsoft, and Meta Platforms deemed it a worthy alternative, particularly in the face of supply constraints across the industry.
AMD has since launched several new GPUs. The latest MI450 chips can be 15% more powerful and 30% more energy efficient than anything else on the market when paired with the company's Helios integrated data center rack. In other words, it appears AMD has officially closed the performance gap to Nvidia.
Anthropic and OpenAI are expected to be two of the largest buyers of MI450 GPUs (along with hyperscalers like Microsoft and Meta). But if Anthropic attracts a lower valuation than expected for its upcoming IPO, it might not raise as much money as it originally hoped, leaving it with less cash to buy chips.
OpenAI has postponed its IPO entirely, suggesting it doesn't feel confident about its ability to attract funding in the public markets. OpenAI has agreed to deploy 6 gigawatts' worth of computing capacity over the next few years using AMD's chips, starting with the MI450, and those plans could be at risk if the start-up doesn't receive significantly more funding.
Lisa Su's guidance on Nov. 3 will be key
Averytin News Financial update.