Ahead of Earnings | Revenue Up 27% but Profit Pressures Continue for MI308 License, AI Pricing to Boost AMD (AMD.US) Stock Price?

Zhitong Caifeng APP has learned that AMD (AMD.US) will release its second-quarter financial report after the US market closes on August 5th (Beijing time August 6th early morning). According to Visible Alpha's compiled data, benefiting from strong sales of data center products, AMD's revenue for the quarter is expected to reach $74.3 billion, a 27% increase over the same period last year. However, adjusted net profit may decline to $7.966 billion (per share $0.48) from the previous year's $12.6 billion (per share $0.69).

This chip manufacturer has seen its stock price surge in recent months due to market expectations that export restrictions on China will be relaxed soon. In May, AMD warned that due to tightened sales of chips to China, it would face an estimated loss of around $8 billion this quarter.

However, Wall Street analysts remain cautiously optimistic about the stock. It is said that once approved by the US authorities, AMD plans to resume exporting MI308 chips to China. RBC recently raised its target price for AMD from $160 to $210 and pointed out that the company has a good chance of obtaining a license to sell MI308 chips to China.

Of the 10 analysts tracked by Visible Alpha, six gave "buy" or equivalent ratings, while five advised "hold", with a target price range of $111-210. The stock has risen over 40% so far this year, closing at around $172 last Friday.

Key Variables

Given that AMD's stock price has already surged significantly this quarter, the direction after earnings reports is uncertain. However, based on optimistic prospects, AMD's overall trend in the second half of the year may continue to rise. The key points to focus on in this quarterly report are:

MI350 Pricing Strategy Adjustment

AMD plans to raise the price of its Instinct MI350 AI accelerator from $15,000 to $25,000, a nearly 70% increase. The market may interpret this as a signal that AI product demand is surging, and it could be the beginning of a low-price strategy adjustment. Even after pricing adjustments, MI350 will still have a price advantage over Nvidia's B200, which costs around $3-4 million. This will help improve profitability.

Consuming Intel's Share with Tariff Pre-Effects

Although last quarter saw denials from all sides, the tariff pre-effect does exist, and AMD is unlikely to be immune. Intel has confirmed that tariff pre-effects bring about year-over-year growth, and AMD's earnings report may show similar impacts. However, AMD's continuous share growth in client and server CPU markets will offset some of the impact. Currently, AMD has a 33% revenue share in the server CPU market, while Intel has slipped from near-monopoly to 63%. IDC and Mercury Research predict that this year, AMD's server CPU share will reach 36%, with some forecasts suggesting it will exceed 40% by 2026.

Despite the favorable trends, AMD faces strong challenges from Arm architectures. Mercury Research shows that Arm has broken through to over 11.9% in the x86 market. The report also points out that AMD's client CPU demand surge is driving share growth. It can be said that except for Intel, all major players have gained shares. Overall, the dynamic energy of share growth and tariff pre-effects will help boost AMD's client business performance.

MI308 Chip License Relicensing

In April, the US ban led to the suspension of sales of MI308 and Nvidia H20 AI GPUs in China, resulting in an estimated $8 billion write-off for AMD. However, this month's temporary suspension has pushed up AMD's stock price by 6%, exceeding Nvidia's gain. The market expects that the inventory will be cleared at "nearly zero cost" with high margins, but this expectation may be too optimistic.

AMD's chief financial officer, Jean X. Hu, said at the Morgan Stanley telephone conference: "The second quarter does indeed have many uncertainties. The MI308 export license issue has had a major impact on AMD, with only data center GPU business losing $7 billion in revenue. At that time, the Chinese region saw DeepSeek and other companies' demand for GPUs surge." Although the obstacles are eliminated, market expectations remain optimistic about AMD's AI story rather than short-term performance validation.

What's worth paying attention to is that AMD successfully attracted OpenAI CEO at its AI day event in June and announced that seven of the top ten AI giants have adopted Instinct chips, including Tesla. Oracle has also signed a contract worth tens of billions of dollars to deploy 30,000 MI355X GPU clusters. At the quarterly report telephone conference, CEO Lisa Su revealed: "This quarter saw the addition of many leading cloud service and enterprise clients, including one top-tier large model developer that has adopted Instinct GPUs for most of its daily inference tasks."

Technical indicators show that MI355X memory bandwidth reaches 22.1TB/s, three times that of B200; FP16 computing power is around 3000-4000 TFLOPS (dense) and gradually approaching Nvidia's 5000 TFLOPS (sparse). Although Nvidia remains the industry leader, AMD's performance is still worth noting.