Advanced Micro Devices (NASDAQ:AMD) shares dropped more than 6% in early trading on Wednesday after Elon Musk revealed that SpaceX plans to source its artificial intelligence processors exclusively from Nvidia, overshadowing AMD’s stronger-than-expected quarterly earnings.
The announcement weighed heavily on investor sentiment despite another quarter of record revenue and upbeat guidance from the semiconductor company.
SpaceX shifts AI infrastructure to Nvidia
During SpaceX’s earnings call, Musk said the company would “build exclusively” on Nvidia’s Blackwell AI platform, describing it as the “best architecture.”
The comments marked a shift from his earlier statements indicating that both SpaceX and Tesla would deploy processors from AMD and Nvidia.
The decision represents a setback for AMD in the highly competitive AI accelerator market, where it has positioned itself as Nvidia’s leading challenger.
Strong financial results fail to lift sentiment
Despite the negative market reaction, AMD reported another strong quarter.
Revenue for the three months ended June 27 reached $11.54 billion, exceeding Wall Street expectations, while adjusted earnings came in at $1.66 per share, ahead of the consensus estimate of $1.60.
The company also issued an optimistic outlook for the current quarter, forecasting revenue of approximately $13 billion, plus or minus $300 million, compared with analysts’ expectations of $12.51 billion.
The guidance points to annual revenue growth of roughly 41% and sequential growth of around 13%.
Data center business remains the key growth engine
Artificial intelligence continued to drive AMD’s strongest-performing segment.
Revenue from the data center division climbed to a record $6.7 billion, accounting for 58% of total company revenue, up from 42% a year earlier.
The business continues to benefit from demand for EPYC server processors and Instinct GPUs, which are widely used for cloud computing and AI workloads.
Meanwhile, the Client and Gaming segment generated revenue of $3.84 billion, representing year-over-year growth of 6.1%.
Lisa Su highlights growing AI opportunity
Chief Executive Lisa Su said the company expects demand to remain strong through the second half of the year.
“We enter the second half with strong momentum as EPYC demand accelerates, Instinct deployments scale and Helios begins to ramp. More broadly, AI is driving a significant expansion in demand for compute across all of our markets,” she said.
AMD has continued to strengthen its position with major cloud providers and AI developers.
During its investor event in July, the company announced infrastructure commitments of up to 2 gigawatts with Anthropic, 6 gigawatts with Meta Platforms and 2.5 gigawatts with Core Scientific.
AMD also increased its long-term outlook for the CPU market, forecasting that it will exceed $200 billion by 2030 while targeting a market share of more than 50%.
Analysts seek faster AI acceleration
Although AMD expects server revenue to grow by more than 70% next year, some analysts believe the outlook could have been even stronger.
Morgan Stanley analysts said they had “expected a more substantial near-term acceleration due to the enthusiasm going back multiple quarters.”
For investors, Wednesday’s share price decline reflected concerns over the loss of a high-profile AI customer rather than the company’s underlying financial performance, which continued to demonstrate robust growth across its core businesses.
Advanced Micro Devices stock price
