*

AMD's data center business revenue surged 122% to $3.5

billion

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Analysts believe Nvidia ( NVDA ) will maintain majority market

share in

AI chips

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AMD expects Q4 revenue of $7.5 billion, below estimates

By Arsheeya Bajwa and Max A. Cherney

Oct 29 (Reuters) - Advanced Micro Devices ( AMD ) on

Tuesday forecast fourth-quarter revenue just shy of estimates

and raised its artificial intelligence chip sales forecast to $5

billion for 2024 - not enough to impress investors.

AMD stock slid nearly 7% in extended trading, erasing most of

the 8% gain in the last three trading days and much of the more

than 10% gained this year.

Demand for AI chips from big technology companies including

Microsoft ( MSFT ) and Meta has been rising much faster

than their supply from AMD and larger rival Nvidia ( NVDA ),

limiting the chip companies' ability to tap the order surge. AMD

CEO Lisa Su said that supplies of AI chips would be tight going

into next year.

"AMD's stock was priced for a beat and raise," Summit

Insights analyst Kinngai Chan said. "Clearly, AMD's

(fourth-quarter) outlook was not good enough for investors."

Revenue in its data center business, which includes AI chips,

surged 122% to $3.5 billion.

AMD still trails front-runner Nvidia ( NVDA ), which commands about 80%

of the AI semiconductor market. Su raised the forecast for AI

chips, which are included in the data center segment, by half a

billion from the $4.5 billion it estimated in July.

In the earnings call with analysts, Su also discussed Microsoft ( MSFT )

and Meta expanding their use of the company's AI chips.

Microsoft ( MSFT ) and Oracle offer the MI300X chips for rent as

part of their cloud computing service.

Analysts largely believe Nvidia ( NVDA ) will maintain its majority

market share for the foreseeable future, owing in part to its

entire AI ecosystem that includes the CUDA software and

networking equipment.

Capacity for the production of AI chips will be very tight going

into 2025, the world's largest contract chip manufacturer TSMC

said in July, marking a significant hurdle for the

supply of these advanced semiconductors. AMD's ability to sell

more of its advanced AI processors is hampered by the supply

constraints at TSMC, Running Point Capital chief investment

officer Michael Schulman said.

The company expects revenue of $7.5 billion, plus or minus

$300 million for the fourth quarter, compared with analysts'

average estimate of $7.54 billion, according to data compiled by

LSEG. AMD forecast an adjusted gross margin of roughly 54%,

which met analyst expectations.

The company reported revenue of $6.82 billion for the third

quarter, compared with estimates of $6.71 billion. AMD reported

adjusted earnings of 92 cents a share, in line with analyst

expectations.

AMD's results weighed on the chip sector in extended

trading. Arm Holdings fell 1.7%, Nvidia ( NVDA ) dropped 0.3%,

Intel ( INTC ) fell 0.4%. Chip equipment maker Lam Research ( LRCX ) fell

0.8%.

"Most investors, once they digest AMD's good results

combined with their lackluster forecast, will try to extrapolate

what that means for the rest of the AI-chip and semiconductor

market," Schulman said.

(Reporting by Arsheeya Bajwa in Bengaluru and Max A. Cherney in

San Francisco; Editing by Anil D'Silva and Lisa Shumaker)