By Arsheeya Bajwa
(Reuters) – AMD investors will closely examine the chip designer’s artificial intelligence strategy when it reports fourth-quarter results on Tuesday as Big Tech’s shift to custom silicon raises doubts about its place in the AI infrastructure race.
Analysts expect AMD’s December-quarter revenue to surge over 22% to $7.53 billion, but the company’s growth prospects are shadowed by the dominance of Nvidia in the AI chip market and the rising trend of tech giants like Microsoft, Amazon.com and Meta developing custom chips.
Investors see “customer silicon and Nvidia as the AI chip market going forward,” said Ryuta Makino, analyst at AMD investor Gabelli Funds. Customer silicon refers to custom chips designed for specific customers, unlike off-the-shelf processors.
Chinese AI startup DeepSeek’s advances with models that can reportedly match or outperform Western rivals at lower costs have also raised concerns over the substantial projected spending on AI infrastructure that has been driving a rally in chipmaker stocks.
Tech giants such as Microsoft, Amazon, and Meta are increasingly dedicating resources to developing their own silicon for processing large data volumes required by GenAI, with all three having unveiled new AI chip versions last year.
This has boosted sales for Broadcom and Marvell Technology, which provide so-called hyperscalers with custom AI processors.
Broadcom CEO Hock Tan has said the company expects AI could present as much as $90 billion revenue opportunity by 2027.
The company’s shares more than doubled in value last year, while Marvell rose about 83%. AMD in contrast, fell 18% in 2024.
Nvidia’s existing majority share of the AI chip market and its proprietary CUDA software- a standard among most developers- is likely to help cushion the company against rising custom chip adoption, said Ben Bajarin, chief executive of technology consultancy Creative Strategies.
The high cost of switching chip providers presents a significant barrier to AMD making further inroads into the market.
However, the push to develop sophisticated AI models could alleviate concerns as Big Tech continues massive AI spending.
TD Cowen analysts, along with Omdia analyst Alexander Harrowell, expect AMD to rake in AI chip sales of as much as $10 billion this year – double AMD’s forecast of $5 billion in AI processor revenue in 2024.
Revenue in the company’s data center chip segment is expected to jump close to 82% to $4.15 billion in the fourth quarter according to data compiled by LSEG- making up more than half of total sales.
Supply for AI chips has also struggled to keep up with demand.
While contract manufacturer TSMC has been working to increase capacity for advanced packaging – a key bottleneck in AI supply chains – Nvidia’s ongoing ramp-up of its latest “Blackwell” AI chips could limit AMD’s ability to secure manufacturing capacity, Mizuho analysts said.
AMD’s personal computer unit is set to grow close to 33% to $1.94 billion and has been steadily eating into rival Intel’s market share.
Analysts have noted PC makers possibly stocking up on chips in December ahead of potential tariffs from U.S. President Donald Trump, boosting chipmakers—a dynamic that helped Intel beat fourth-quarter revenue estimates last week.
AMD’s fourth-quarter net income is set to rise more than 61.4% to $1.08 billion.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Tasim Zahid)
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