Yahoo Finance’s Daniel Howley joins the Live show to discuss quarterly earnings for AMD, the drop in PC sales and shipments, and the outlook for AMD.
- He also mentioned AI for the first time. That is AMD. So let's get on to that one. Chipmaker Advanced Micro Devices topped earnings expectations for the fourth quarter as revenue grew 16% year over year, despite a slowdown in the PC market. Here is Yahoo Finance's Dan Howley with what you need to on AMD's earnings.
DANIEL HOWLEY: Chipmaker AMD beat analyst expectations on fourth quarter earnings despite slowing PC sales across the computing industry. Here's what you need to know AMD topped analyst estimates on both earnings and revenue for the quarter ending in December 2022. The US chipmaker posted revenue of $5.6 billion on strong growth in its data center business, which grew 42% year over year. This comes on the heels of a dismal report from rival chip giant Intel, which posted disappointing losses for Q4. As a whole, the semiconductor industry is facing a steep drop in PC sales, as consumers choose to hold on to the computers they purchased at the peak of the pandemic.
VIVEK ARYA: Of course, there is a cyclical aspect of it that PCs were one of the biggest beneficiaries when we were all locked up at our homes during COVID. So we are seeing the other side of it.
DANIEL HOWLEY: Not immune to weakness in the PC market, AMD reported a 51% decline in processor shipments from this time last year. According to market research firm Gartner, overall PC shipments declined a stunning 28% in the fourth quarter. That's the biggest fall since the company began tracking shipments in the mid 1990s.
These issues are bleeding into AMD's video game division as well. The company reported a 7% revenue decline for its gaming segment year over year. Still, the chipmaker's data center business remains strong, outperforming its peers and posting $1.7 billion in revenue for the quarter, up 42% since last year. Looking ahead, AMD is Warning of a 10% revenue decline year over year for Q1.
- Helpful stuff there by our very own Dan Howley. And it is interesting to read the analyst commentary here this morning. The Street universally still loves AMD. But there are a lot of analysts now looking for at least one more profit warning from the company because of the ongoing PC correction and some slowdown in the data center market, in large part because of a slowdown in the cloud business. So the Street is they love the company. They love CEO Lisa Su. But they're bracing for more bad news.
- And across the semiconductor space, it's a heavy investment period too. And so even as you're kind of looking out over these next 10 years, perhaps, this is where you start to get into the conversation, or at least some analysts have floated the idea of this golden decade that we may be entering into. And it raises this larger question of, well, are we at the trough of that point, so that investors can get a better sense of where within the growth opportunity or that next growth cycle for semiconductors, where they can expect to see the bottom set in and actually start to monetize, or at least see some accretive nature to some of those investments too.
- Yeah, AMD shares have about 16% year to date going into the report, which is about in line with what we've seen from the Philadelphia Semiconductor Index. I think your point-- I can't remember which one you said-- on Intel is a good one, that analysts still like AMD. And AMD, in part, if it didn't have that sort of foil, if you will, or that sort of competitor that throws its results into relief, you wonder how it would look. But I mean, you have Intel to compare it with. And Intel looks really bad. So by comparison, if you're going to buy a big chip maker in this particular segment, the choice at this point is probably pretty clear for people.
- And you mentioned AI. And that is becoming the buzzword of this earnings season. I think a lot of executives have been told, mention something about AI on your earnings call because Chat GPT is so hot. And mention it even if you may not be working anything on it. AMD did mention AI for the first time ever on its earnings call. AMD, of course, will have a role, some form of role, in the future of AI. But if you hear-- this is just a warning to all investors. If you hear a supermarket company talk about AI, it's a red flag. I mean, you have to know what they're working on. At least with AMD, at least they're in tech, So yes, you can see them doing AI.
- Well, what about the robot that cleans the aisles?
- Is that AI?
- It doesn't bump into--
- Is that AI? That's not AI.
- No. AI is getting the same treatment in 2023 that blockchain got in 2017.
- Yes. Yes.
- And that's exactly what we're seeing some of the biggest reactions on, or at least some investors really playing up. We saw see C3 AI move higher by about 21% yesterday, still higher here pre-market as well, on an announcement about a product suite, which is probably something that they were already working on years ago.
- And they should be doing AI. They should be.
- It's in their name.
- Well, listen-- I mean, listen, it's interesting. And it's exciting. It's just a question also, where we are in the cycle for it. Are we too early? We've gotten excited about a lot of things over the past few years, autonomous driving, the metaverse, et cetera. Some stuff that was already around, they just relabeled as whatever the hot new thing was.
- Catalyst plays.
- Right. So you know, I think we have to obviously keep our eyes open--
- I'm getting--
- --about this stuff, even if we're getting a little-- even if we're excited.
- I mean, we can't forget about Watson, IBM Watson, as we were discussing in a couple of meetings ago. And I mean, for IBM, they've started to just ratchet up some of that social media advertising, showing up in my Twitter timeline, at least, yesterday here too, so everybody trying to--
- IBM is still advertising on Twitter, huh?
- Yes, they are.
- We got a little reporting.