Worst since 2018! AMD plunges 17% intraday—Is earnings guidance the culprit?

On the first trading day after releasing its earnings after market close Tuesday, AMD's stock opened down 11.2% on Wednesday, with intraday losses expanding to over 17% by late morning trading, marking the largest intraday decline since October 2018. If the drop remains above 13% at close, AMD will erase all gains made since the start of 2026.

Overall, AMD's Q4 results beat Wall Street expectations—so why did the stock plunge? Commentators believe it's partly because AMD’s Q1 revenue guidance failed to meet some analysts’ lofty expectations, and investors have doubts about AMD's ability to catch up with Nvidia in the fiercely competitive AI chip market.

AMD's Q1 revenue guidance midpoint is about $9.8 billion, which is higher than the nearly $9.4 billion consensus estimate, but lower than Q4's record $10.27 billion and does not reach the more than $10 billion expected by some optimistic analysts.

This weak guidance disappointed the market, as investors had hoped to see bigger returns amid the AI spending boom. Additionally, AMD disclosed that while increased sales of older chips in China added to revenue, they dragged down profit margins. Bernstein analyst Stacy Rasgon said, "Overall results are not much more than 'as expected' if you exclude the boost from China," and pointed out that "short-term AI business data do not show real inflection point growth."

This plunge also reflects investors' more cautious reevaluation of AI sector valuations. AMD trades at a forward P/E of 33.16 times; at such high valuation, any execution misstep can lead to sharp corrections.

Strong Earnings But Lingering Competitive Concerns

AMD's earnings report shows Q4 revenue up 34% year-over-year to $10.3 billion, beating the $9.65 billion analyst consensus. Adjusted EPS for the quarter was $1.53, 16% above the expected $1.32.

As a major beneficiary of AI spending, AMD’s data center business grew 39% year-over-year in Q4 to $5.38 billion, well above the $4.97 billion analyst estimate. PC-related sales grew 34% to $3.1 billion.

Media reports point out that AMD faces increasing competitive pressure in the rapidly growing AI chip market. Tech giants are increasingly adopting custom AI chips, such as Google reaching a multi-billion dollar processing supply deal with Anthropic—challenges that add to AMD's pressure.

On Tuesday after market close, AMD disclosed that Q4 shipments of MI308 chips to Chinese customers generated $390 million in revenue, but Q1 sales are expected to drop to about $100 million, showing demand for this increasingly outdated product is waning. AMD says it is still seeking approval to sell the newer MI325 processor in China.

Divided Wall Street Analyst Views

Susquehanna’s Chris Rolland commented: "First, expectations were very high. Second, they announced China market shipments this quarter, which was unexpected. This was not priced in, so when you factor this in, the beat is much narrower than we thought."

However, Rolland also pointed out that demand for AMD datacenter chips remains strong, and the company hinted at future multi-gigawatt (GW) contracts.

AMD CEO Lisa Su kept her usual upbeat tone on the earnings call, reiterating her forecast that company AI revenue will hit tens of billions by 2027. She seemed unconcerned about potential component shortages, stating the company should be able to meet the expected spike in orders. She told analysts: "There’s no doubt demand remains strong. So we’re working with our supply chain partners to boost supply."

Su added that demand for next-gen AI servers, including shipments to OpenAI and other customers, is expected to greatly accelerate in the second half of this year.

AMD’s recent deals with OpenAI, Oracle, and the US Department of Energy reflect rising market interest in its MI series AI accelerators. Last October, AMD reached an agreement with OpenAI, with OpenAI potentially holding 10% of AMD’s shares and planning to deploy 6GW of AMD Instinct GPUs over many years. Oracle also announced plans to deploy 50,000 AMD AI chips starting later this year.

Decline May Present Buying Opportunity

Despite the steep drop, some analysts believe this correction may offer investors a buying opportunity.

Market commentator Thomas Hughes noted that AMD’s post-earnings decline looks like the buying window bulls were hoping for. While results beat consensus, "whisper numbers" indicate the big leap expected will come later this year.

According to MarketBeat’s tracking, early revisions include many rating and price target reiterations, as well as some target price upgrades focused on future prospects. Helios rack-scale solutions are expected to launch in the second half of this year, driving significant acceleration in growth. Most analysts’ price targets for AMD are between $280 and $300, implying 40% to 50% upside from key support levels, with potential to reach new all-time highs.

Investors' reaction to AMD earnings stands in sharp contrast to Super Micro Computer (SMCI), whose stock soared and was up nearly 17.8% in early trading Wednesday after its earnings report.

Super Micro raised its annual revenue guidance after market close Tuesday, signaling continued strong demand for AI-optimized servers. This upbeat outlook underscores robust downstream AI infrastructure spending, even as investors question how quickly chip makers can translate demand into short-term profit growth.

AMD trades at a high forward P/E of 40 times, meaning the market expects flawless execution of chip launches, infrastructure rollouts, and customer deals. But key catalysts like MI450 and Helios rack-scale solutions are still ahead, with their potential to drive the market increasingly evident.

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