AMD’s AI Chip Struggles Continue as Investors React to Weak Data Center Guidance
February 6, 2025 – Shares of Advanced Micro Devices (AMD) fell 9% in after-hours trading on Tuesday, as the semiconductor giant missed Wall Street’s expectations for data center sales in its latest earnings report. While AMD beat fourth-quarter revenue and profit forecasts, its guidance for AI chip revenue disappointed investors, sending the stock sharply lower.
CEO Lisa Su indicated that data center sales—widely considered a key metric for AMD’s AI chip growth—would decline by 7% sequentially in Q1 2025. Despite this, she remained optimistic about AMD’s long-term prospects, projecting “tens of billions” in AI chip sales over the next few years.
With AMD struggling to compete with AI chip leader Nvidia (NVDA), investors are closely watching key technical support levels for the stock, which has been trending downward since falling below its 200-day moving average in October 2024.
AMD’s Earnings Report: Key Figures
✔ Revenue:
- Q4 2024 revenue came in above Wall Street estimates but was overshadowed by weak data center sales.
- The AI chip segment struggled to gain traction, contributing to the stock’s post-earnings decline.
✔ Profitability:
- Earnings per share exceeded expectations, demonstrating AMD’s ability to maintain strong financial performance despite competition.
✔ AI Outlook:
- AMD expects “tens of billions” in AI-related revenue over the next few years, but short-term growth remains slow, disappointing investors.
✔ Stock Performance:
- AMD shares dropped 9% in after-hours trading, bringing its 12-month decline to over 30%.
- The stock remains in a descending price channel, signaling continued technical weakness.
Technical Analysis: Key Support and Resistance Levels
AMD’s stock has been trending downward since October 2024, when it fell below its 200-day moving average. Investors should monitor the following key support and resistance levels as the stock reacts to its latest earnings report:
📉 Key Support Levels to Watch
✔ $110 – Initial Support Zone
- AMD’s stock is expected to open near this level on Wednesday.
- This level previously acted as support between May and October 2023.
- If buyers step in, $110 could serve as a short-term floor.
✔ $95 – Critical Support Level
- A decisive breakdown below $110 could push AMD down to $95, a historically significant level.
- This price corresponds to trendline support from May 2023, making it a key test for AMD bulls.
✔ $81 – Bearish Target if Selling Continues
- If AMD fails to hold $95, further downside could see the stock drop toward $81.
- This level represents multi-year support and could attract value investors if reached.
📈 Key Resistance Level to Watch
✔ $130 – Overhead Resistance
- If AMD attempts a countertrend rally, its first major resistance sits at $130.
- This level previously served as support before the October breakdown.
- A break above $130 would signal a potential trend reversal.
Why Is AMD Stock Falling?
AMD’s AI chip ambitions have been overshadowed by Nvidia, which dominates the high-performance AI GPU market. Here are the main reasons for AMD’s stock decline:
1. Weak Data Center Growth
- AMD’s data center sales underperformed Wall Street estimates.
- AI chips represent a key growth area, but AMD has yet to gain meaningful market share from Nvidia.
2. Competitive Pressure from Nvidia (NVDA)
- Nvidia’s H100 and H200 AI chips remain the industry standard for machine learning and data center applications.
- While AMD has launched competing products, Nvidia’s dominance remains unchallenged in the short term.
3. Technical Weakness in AMD’s Stock Chart
- The stock has been trading in a descending price channel since October 2024.
- Failure to hold key support levels could trigger further selling.
4. Investor Sentiment Shifts to AI Leaders
- While AMD has AI potential, investors are prioritizing companies with established AI revenues, such as Nvidia and Microsoft.
- AMD’s long-term AI projections did not offset concerns about near-term weakness.
What’s Next for AMD?
While AMD’s long-term AI strategy remains intact, the company faces short-term headwinds as it tries to capture market share from Nvidia. Here’s what investors should watch:
✔ Short-Term AI Revenue Growth:
- AMD must demonstrate significant AI revenue growth in upcoming quarters to regain investor confidence.
✔ Key Support Levels:
- If $110 and $95 fail to hold, the stock could see further downside pressure.
✔ Competitive Landscape:
- Investors will monitor whether AMD can develop AI chips that rival Nvidia’s dominance.
✔ Macroeconomic Factors:
- Interest rate decisions, inflation, and economic growth will impact the semiconductor sector.
Conclusion: Is AMD a Buy, Hold, or Sell?
AMD remains a strong long-term player in the semiconductor industry, but its short-term AI struggles have led to increased volatility. Investors should consider the following before making a decision:
✔ Long-Term Investors:
- If you believe in AMD’s AI chip potential, waiting for a better entry point near support levels could be a good strategy.
✔ Short-Term Traders:
- The $110, $95, and $81 support levels should be watched for potential trading opportunities.
- A break above $130 could signal a bullish reversal.
✔ Cautious Approach:
- Given Nvidia’s continued dominance, investors may wait for stronger AI revenue confirmation before buying AMD.
AMD’s next few quarters will be critical in determining whether it can compete effectively in the AI space or remain a secondary player to Nvidia.
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