AMD Jumps 6.7% as Amazon Opens $60 Billion AI-Chip Door
Synopsis
AMD surges 6.7% as Qualcomm reveals a potential $60 billion Amazon deal, while AMD forecasts its data-center revenue could hit $70 billion by 2027.
Key Highlights
- Qualcomm reported Amazon may buy as much as $60 billion in AI data-centre products, while AMD shares rose about 6.7%.
- AMD’s revenue surged 50% to $11.54 billion in the second quarter, as data-centre sales almost doubled to $6.7 billion
- AMD said mostly on track to reach a $ 70 billion data-centre business by 2027
- The business has tentatively lined up $29bn to $30bn in purchase agreements in support of the extension.
- AMD Shares Rally on AI Demand
Qualcomm said a partnership with Amazon could lead to the purchase by Amazon of as much as $60 billion in AI data-centre products over several years. Shares ofAMD rallied about 6.7% to $509.635 on Tuesday, led by continued bets by investors on climbing demand for artificial intelligence computing infrastructure alongside Nvidia (NVDA).
That enthusiasm is explained by AMD’s second-quarter results. Sales jumped 50% for a record $11.54 billion, while data-centre sales more than doubled ($6.7 billion). The division now accounts for about 58% of total revenue, which puts AI infrastructure front and centre in AMD’s growth machine.
Qualcomm's strategy is to reach $15 billion of annual data-centre revenue by 2029, which amounts roughly to 56% of AMD’s data-centre run rate at $26.8 billion annualised. The possibility of such a commitment from Amazon shows the size of the prize, but it also indicates that hyperscalers have both the funds and the incentive to support alternatives to established merchant chips. AMD currently trades at an 82.57% premium to its $279.15 GF Value, suggesting that the market is already pricing in significant AI-fueled growth on top of that.
AMD has announced an increased long-term AI revenue target
AMD is putting a much larger number behind its AI ambitions. Shares rose over 6% Tuesday after the chipmaker told investors its data-centre business could see revenue of about $70 billion in 2027, more than double the size of the business.
AMD suggested AI GPU revenue might approach the low-$40 billion next year on the strength of its MI450 ramp and customers Meta Platforms, OpenAI and Anthropic. MI450 has already begun shipping production units in Q3, ramping up more so in Q4 and then again starting in the early part of 2027.
AMD said it estimates market could increase to $220 billion by 2030, up from a previous estimate of just $60 billion in the new data centre opportunity for server CPUs. So it gives AMD two different ways to capitalise on spending in AI infrastructure; the accelerators and the CPUs that surround them.
There is a cost, however. Other categories remained constrained: advanced wafers, high-bandwidth memory, and packaging, AMD said. To facilitate the expansion, the company has evinced around $29 billion-30 billion in purchase commitments. Margins are also likely to take a hit in the meantime as MI450 ramps, with AMD forecasting Q4 and 2027 gross margin points to decline but overall gross profit dollars to grow.
With that info in mind, it probably makes sense for AMD to make an aggressive bid now to win a larger part of the AI market. The second test will be if the MI450 ramp can convert that spending into the type of revenue growth AMD predicts for 2027.
Source: Yahoo Finance
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