AMD earnings under even greater scrutiny after Intel’s ‘surprisingly poor’ outlook

Advanced Micro Devices Inc. could show Wall Street if it “definitely” ended 2022 in a better place, after the price of a stock clearing helped understand rival Intel’s results.

AMD AMD,
+0.32%
is scheduled to report earnings after markets close on Tuesday.

AMD CEO Lisa Su said three months ago that the company’s forecast, which was below Wall Street estimates at the time, included inventory liquidation costs, and that the company “definitely ends the year in a better position.” Su also said data center sales are expected to rise.

Doubts about data center demand and cost of excess inventory intensified after Intel INTC
-6.41%
reported earnings that showed inventory clearing led to lower gross margins as the processor maker faced the worst decline in PC shipments in history. In addition, Intel said it expects the overall data center market to fall at an “accelerated rate.”

To read: ‘It’s not an earnings report, it’s a crime scene’: Analysts and social media react to Intel’s dreaded quarter

Bernstein analyst Stacy Rasgon, who recently downgraded AMD’s market performance from “outstanding,” said AMD had “no room for error” in its report, and that was before he saw Intel’s “surprisingly poor” forecasts fail. beat already low expectations “with earnings and gross margins falling amid further weakening environment and an absolutely massive inventory influx.”

Rasgon said that the situation in the PC market has deteriorated significantly, and his “belief that AMD would be relatively more resilient to channel degradation, unfortunately turned out to be wrong.”

And with the channels jammed, another analyst’s prediction almost two years ago seems to be coming true: Intel is resorting to a price war, or what Rasgon called “Intel’s semi-disruptive behavior of late as they use both price and capacity as strategic weapons.”

“In response, we have seen AMD’s new client parts available at deep retail discounts less than 2 months after launch (much deeper and much faster than the previous generation),” Rasgon said.

Opinion: Intel Just Went Through Its Worst Year Since The Dot-Com Crash, And It Won’t Get Better Anytime Soon

AMD, Intel and Nvidia Corp. NVDA,
+2.84%
they all poured new models of gaming cards into the holiday channel at a time when PC shipments are dropping at an all-time high and a wave of used GPUs or GPUs is hitting the market as money-losing cryptocurrency mining operations wind down.

“AMD stock should be in the spotlight, and PC concerns are high here, despite expectations of an increase in server share,” Mizuho analyst Jordan Klein said in an email comment. “I believe the buyer side wants AMD to show maybe solid growth in 23 compared to minus 5% due to PC dumps, and then slowly start buying this weak outlook.”

This will be AMD’s first report since the company announced the hiring of Zhang Hu of Marvell Technology Inc. mrvl,
-0.32%
as the new chief financial officer. Hu joined AMD on January 23, replacing the retiring Devinder Kumar.

To read: AMD makes history for Asian women leaders

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