AMD Revised Guidance

The Six Five team discusses AMD’s revised guidance.

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Transcript:

Patrick Moorhead: AMD’s revised guidance. I got some texts last night while I was on the runway to check out some information, but AMD revised guidance last night, and it’s interesting. I had expected this earlier when Intel did their big warning, but AMD came out late. So a couple things that I think are important to understand is, it’s really just a client business, which is down 40%. And that’s in comparison to Intel’s that was down 50%. Also, other areas of their business, one in particular is doing exceptional. Data Center is going to be up 45%. Gaming. If you recall, Nvidia was down a substantial amount of money, and that’s going to be up 14%, which is just mind blowing.

And something that skews the numbers a bit is embedded, AKA Xilinx acquisition up 1500%. Because there was no revenue, or very little revenue, in that area. So probably a quarterly number is more important, and they were up four percent. A little lower than I’d expected because of all the business they do in automotive, but up nonetheless. So A and B for this upcoming Q3, up 29%, and we’ll see in a few hours what the investors and how they take it.

Net net, it is still a very good midterm and long term play. It’s nothing that the company did wrong, it has everything to do with the macro environment. So I can’t say the company’s making a mistake. I am very interested to understand why they felt it a quarter later. Is it because they have most of their business that’s going to processor in a box where people are actually assembling it? I need to get underneath that. I think we’ll get a better story once we see what happens to the OEMs like HP, Dell, and Lenovo.

Daniel Newman: Yeah, it’s also going to be really interesting to see what happens to Intel, which should be reporting very, very soon. I think last quarter Pat Gelsinger said he thought we’re there at the bottom or very close. So is this the bottom?

You know Pat, I think you hit it on the head. A couple things I think worth pointing out. One is, AMD’s down about eight percent as the market’s open. Sometimes we forget because it’s 6.30 in the morning here, but in other parts of the world people are awake. I always feel like I’m such a waste when I’m in California.

Patrick Moorhead: Crazy day traders.

Daniel Newman: Yeah, absolutely. And I think that this actually really makes me feel validated and vindicated in things I’ve been saying. Because I’ve said for a long time, enterprise is going to be robust and consumer is about to hit the wall. I’ve said this for three quarters now.

And for a few quarters it didn’t actually happen, and I think there was some backlog, I think there was lagging, I think there was orders and fulfillments and shipping. And I do think people are slowly recognizing the economic situation. You and I stare at CNBC in Bloomberg all day and we listen to it and we talk to tech companies. I think a lot of people are walking around with their head in the sand, have no idea what’s going on. They see jobs reports and they’re like, “Oh, look how low unemployment is.” And yeah, that’s because no one’s working, because we’ve been giving people money for three years now.

It’s just the truth. And this is not political, it’s economics. By the way, go back to school, go to class. You can have a very low unemployment rate if labor participation is low enough. And I know I’m a little sidetracked from AMD, but long and short Pat, Data Center, good, really good. And I think they’re going to do well when they have their next release coming out.

The PC business isn’t an indicator of AMD. PC business is an indicator of, we sent money out of helicopters for three years, people bought a lot of PCs. Companies had too much capital, they updated and upgraded and added and hired. Hiring’s slowing. I don’t care what the jobs report says, you don’t need as many PCs at work and you don’t need as many PCs in the home, and people don’t have as much disposable income. So there you go, that’s what’s happened. Let’s go to the next thing.

Yeah, I just wanted to do a boomerang. The commercial PC market’s actually okay, and it’s actually still growing. The issue is consumer. Consumer hit a fricking bottom. Apple was down last quarter with MacBooks, and some people said, “Oh, that’s because they were in a products transition between M1M and two.” I don’t think that’s accurate at all. If you look at HP and Lenovo, who are very consumer focused, their numbers were not good, driven by the lack of consumer. They did drive commercial, though, and then Dell came out, who had double digit growth in commercial.

So this is very much consumer confidence type of thing. Ironically, something we thought that was going to happen at the beginning of the pandemic, but with those stimi checks, people had the money, and they rolled them into electronics.