AMD Focuses on AI After Data Center Success, Reports 20% Annual Revenue Growth

Advanced Micro Devices Inc.’s next target is artificial intelligence, just as it targeted the data center market a few years ago.

At the chipmaker’s analyst day on Thursday, AMD AMD,
Chief Executive Lisa Su said AI is at an inflection point with technology stemming from the company’s recent acquisition of Xilinx.

“This is the highest growth opportunity for us, the biggest growth opportunity for us over the next few years,” Su told analysts.

A few years ago, Su said the data center was the place to lean, and since then AMD has consistently and notably taken market share in central processing units, or CPUs, from Intel Corp. . INTC,
With the recent acquisition of Pensando, Su said AMD now has advanced technology in data processing units, or DPUs, chips specifically designed to process large-scale data. Intel and Nvidia Corp. NVDA,
are the main suppliers of DPUs.

Su said AMD plans to be the “partner of choice in the data center over the next three to four years.”

“When I think about where we are today as a company: it’s such a different company than where we were a few years ago,” Su said. This seems to echo what analysts were saying about AMD after its earnings report about a month ago. Just four years ago Intel was more than 10 times the market capitalization of AMD, now they are evenly sized when it comes to market capitalization at around $160 billion.

Su also released details of the company’s financial model over the next three to four years. The company expects annual revenue growth of approximately 20% annualized, free cash flow margins of more than 25% and gross margins of more than 57%.

The latter is significant, as AMD just surpassed 50% gross margins a few quarters ago, while Intel struggled to maintain gross margins above 50%.

AMD shares rose about 1% in after-hours trading on Thursday. The stock has fallen more than 30% so far this year, as the S&P 500 SPX index,
fell by 13.7%.

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