AMD Data Center Growth Slows, Shares Tumble Amid AI Chip Competition
Advanced Micro Devices (AMD) reported its Q2 2025 financial results, highlighting a slowdown in its data center growth, which impacted investor confidence and led to a decline in its stock price. Although AMD posted a record revenue of $7.69 billion, a 32% year-over-year increase driven largely by strong client and gaming sales, the data center segment faced challenges. Data center revenue rose 14% to $3.24 billion, but operating income for this segment declined sharply to a $155 million loss, down 121% from the previous year. This was primarily due to an $800 million inventory write-down linked to U.S. export restrictions on AMD’s MI308 GPU products intended for the Chinese market.
Pressure From AI Chip Market Competition and Export Controls
AMD attributes most of the data center revenue growth to EPYC CPU sales, gaining market share among cloud and enterprise customers. However, export control regulations have restricted sales of key data center GPUs, weighing on profitability and causing operating margins in the segment to fall into the negative. Despite these setbacks, AMD’s client and gaming segment performed robustly, with $3.6 billion in revenue, a 69% increase year-over-year. The company expects continued growth in Q3 with a revenue forecast between $8.4 billion and $9.0 billion, fueled by strong demand for AI chips like the MI350 and anticipated MI400 series accelerators.
CEO Dr. Lisa Su emphasized the company’s strong position in high-performance computing and AI-driven markets but acknowledged near-term challenges posed by export restrictions and competitive pressures. AMD's shares fell following the earnings release, reflecting investor concerns about data center profitability despite the company's optimistic outlook on AI chip expansion and overall growth opportunities.
This financial update underscores the complex landscape AMD faces as it balances rapid growth in client and gaming segments while navigating geopolitical issues and fierce competition in the AI and data center chip markets.