On Wednesday, chip stocks experienced significant declines led by Advanced Micro Devices (AMD) and Super Micro Computer, following their earnings releases that failed to meet the heightened investor expectations fueled by optimism around AI technology advancements.
AMD’s shares plummeted nearly 10%, potentially erasing over $21 billion in market value.
The company projected $4 billion in AI chip sales for 2024, which did not meet the ambitious targets anticipated by Wall Street, especially in light of the larger rival Nvidia’s robust forecasts.
Super Micro Computer, which had seen its stock surge by 150% this year—surpassing even Nvidia’s gains—fell sharply by more than 16% after its third-quarter revenue failed to reach projected figures.
This drop came amid concerns about the profitability of its new server line. Additionally, the broader Philadelphia Semiconductor index saw a decline of 3.5%.
Other notable chipmakers also saw declines, with Nvidia dropping 5.7%, Micron Technology losing 2.9%, and Marvell Technology, another AI-related chip company, falling 3.6%.
Russell Hackmann, president of Hackmann Wealth Partners, commented on the market’s recent cautious stance, saying, “As the market is shifting more towards risk-off over the last couple of days, it’s not shocking that unless these companies are beating earnings by a mile that some of the hot air is coming out of them for now.”
AMD and Super Micro executives attributed some of their challenges to supply constraints that hindered their capacity to meet the surging demand for AI-powered equipment.
Analysts at TD Cowen highlighted the pressure on supply chains due to the rapid ramp-up required for AMD’s MI300 AI chip, yet they noted a rise in customer engagement not only for MI300X but also for its upcoming successor products.
Despite the setbacks, several analysts remained optimistic about AMD’s prospects, suggesting that easing supply chain issues could enable the company to expand its market share in the AI chip sector and generate substantial revenue.
Following these developments, AMD saw mixed analyst reactions with at least 10 analysts lowering their price targets and eight raising their assessments.
Super Micro received three price target hikes against two reductions.
In related market movements, shares of companies like Apple, Qualcomm, and Qorvo, which are suppliers to the tech giant, also recorded declines of 0.7% and 3.4%, respectively, just ahead of their earnings reports scheduled for later in the day.