AMD shares dip as tech valuation worries hang over sales, profit jump

Investing.com - Shares of Advanced Micro Devices (NYSE: AMD) dropped in premarket U.S. trading on Wednesday, as a spike in sales and profit at the artificial intelligence chipmaker was overshadowed by darkening sentiment around elevated tech valuations.

AMD, whose shares have more than doubled in value so far in 2025, has been positioning itself as a major rival to AI-darling Nvidia in the race to provide the computing power needed to underpin the nascent technology -- a trend that CEO Lisa Su told investors has driven "unprecedented growth opportunities."

The firm has also received a significant boost from a range of investors, including ChatGPT-maker and AI industry figurehead OpenAI as well as the U.S. Department of Energy. While such dealmaking has been viewed as necessary to sustain the AI boom, investors have begun to increasingly fret over the possibility that these transactions and heavy spending by mega-cap tech players could fuel a market bubble.

Data center revenue, which folds in sales of AI chips, surged by 22% to $4.3 billion during the September quarter. Client and gaming business revenue jumped 73% compared to a year ago to $4 billion.

Group-wide, the top-line return of $9.25 billion for the period surpassed analysts’ average estimates, according to LSEG data cited by Reuters. Income of $1.96 billion, or $1.20 per share, topped projections.

For the current quarter, revenue is seen at $9.6 billion, plus or minus $300 million, above expectations as well. The guidance marks a "clear step up in our growth trajectory as our expanding compute franchise and rapidly scaling data center AI business drive significant revenue and earnings growth," AMD said.

Yet investors remained focused on the underlying contours of AMD’s profitability, specifically a 14% drop at its data center division. AMD, like Nvidia, has been racing to ramp up its chip production to meet runaway demand -- a task that has pushed costs higher.

In a note, analysts at Jefferies including Blayne Curtis and Kevin Garrigan said that while operating expenditures were a "little higher," the spending was focused on research and development and "to be expected" as AMD intensifies output.

They added that the next update on the "AI opportunity" before AMD should come at the firm’s analyst day next week.

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