24/7 Wall St. Insights
- Advanced Micro Devices Inc. (NASDAQ: AMD) and Microsoft Corp. (NASDAQ: MSFT) have raised concerns that AI revenue is not growing as fast as expected.
- Nvidia Corp. (NASDAQ: NVDA) results will be the real test.
- Also: 2 Dividend Legends to Hold Forever.
Advanced Micro Devices Inc. (NASDAQ: AMD), usually considered the number two artificial intelligence (AI) chip company behind Nvidia Corp. (NASDAQ: NVDA), posted disappointing earnings. Its outlook for the year’s final quarter was for revenue to be between $7.2 billion and $7.8 billion. Investors panicked and the shares dropped 9%. The expectations for AI growth are so fantastic that results must be spectacular.
Microsoft Corp. (NASDAQ: MSFT) disappointed investors despite a solid quarter. Revenue was up 16% to $65.6 billion, and earnings rose 10% to $3.30 per share. Its cloud business, known as “Intelligent Cloud,” gained 20% to $21.4 billion. Satya Nadella, board chair and chief executive officer of Microsoft, pointed out how critical AI is to his company: “AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process.”
Microsoft Chief Financial Officer Amy Hood ruined the earnings party. She said Microsoft’s revenue for the current quarter would take a hit because of losses at OpenAI, of which Microsoft is part owner. The total would be $1.5 billion. Hood’s comments also hinted at slowing growth in this quarter. What happened to the AI growth explosion? Microsoft’s stock dropped almost 4%. There had already been doubters. Shares were up 15% year to date before earnings, while the S&P 500 was 24% higher.
AMD and Microsoft raise concerns that AI revenue is not growing as fast as expected. Nvidia’s revenue will be the real test. Investors will think the AI explosion is in trouble if they are light.
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