AMD's Q4 financial report shines but cannot hide uncertainties in AI, Wall Street questions the sustainability of growth.

American chip giant Advanced Micro Devices (AMD.US) became the focus of the market on Wednesday. The company's fourth quarter performance and guidance were better than expected overall, but several Wall Street institutions pointed out that there are still uncertainties behind the data, and it is "not as optimistic as it seems on the surface." As a result, AMD's stock price fell more than 14%, while competitor NVIDIA Corporation (NVDA.US) fell more than 1.5%. Wedbush Securities analyst Matt Bryson stated that AMD's fourth quarter data center revenue included approximately $400 million in unexpected MI308 revenue from the Chinese market, which supported the performance. However, the company only expects about $100 million in revenue from MI308 in China in the first quarter in its guidance, which has confused the market. Bryson pointed out that although AMD's overall outlook is still better than the market's consensus expectations, in the context of CPU supply shortages, the market originally expected the company to release more incremental value through higher sales volume, optimized product structure, and price increases. These factors were not fully reflected in the performance and guidance, which is why the stock price saw selling after the financial report. He maintained an "outperform" rating on AMD and gave a target price of $290. Morgan Stanley analyst Harlan Sur also believes that this financial report and guidance are "mixed blessings," especially influenced by fluctuations in the Chinese business. He pointed out that although the first quarter guidance is better than expected, there are doubts about whether AMD can achieve stronger operating leverage, which could continue to be a pressure on the stock price or may not be clearly validated until the second half of 2026. In addition, with the later release of the MI450/Helios accelerator, gross margins face potential risks. Sur maintains a "neutral" rating with a target price of $270. Regarding the fluctuation in Chinese revenue, AMD management stated that the situation is still dynamic. CEO Lisa Su and CFO Devinder Kumar explained that the approximately $400 million in Chinese revenue in the fourth quarter mainly came from a license, which was approved by the Trump administration and the order was confirmed in early 2025, therefore the revenue was recognized in Q4. Su added that the company expects about $100 million in revenue from China in the first quarter, but due to rapid changes in the policy environment, additional contributions from the Chinese market are not currently included in the guidance. She revealed that the company has submitted a license application for MI325 and will continue to communicate with customers about their needs, but out of caution, she does not predict additional revenue at this time. Morgan Stanley analyst Joseph Moore expressed surprise at the significant weakness in AMD's stock price after the financial report. He believes that the performance numbers are quite good, and the company has also sent positive signals in new products, but market expectations were clearly higher, leading to a negative stock price reaction. Moore pointed out that although CPU shortages may trigger market expectations for "additional upside," server products are not commodities, and their impact will not be immediately reflected. However, AMD achieved double-digit growth in its server business in the traditionally weaker first quarter, indicating strong demand for the whole year. In addition, the company has already captured over half of the market share in multiple cloud computing markets, which is very positive for long-term development. In the field of AI, Moore believes that there is still uncertainty in the outlook. He has high expectations for AMD's rack-level products, but viewing CoWoS capacity as revenue forecast may be too optimistic. Customers still need to test the new products to assess real demand, and although the AI hardware investment cycle is strong, the competitive environment is fierce, with NVIDIA Corporation and ASIC manufacturers rapidly advancing. AMD needs to launch a very strong MI400 series next year to consolidate its market position. Moore maintains a "hold" rating and lowers the target price from $260 to $255. In addition, despite the stock price decline, Guosen analyst Jeff Pu reiterated a "buy" rating. He stated that market concerns about the progress risk of the MI455 have been resolved, as the management emphasized that the development of the MI455/Helios rack product is progressing smoothly and parallel testing is underway with customers. The company also revealed that the first MI455 project in collaboration with OpenAI is progressing as expected, and another long-term major customer for MI455 is expected to be added before the end of this year. Pu believes that AMD has ample customer reserves in the MI455X product line, and there may be more demand upside in the future, especially considering the progress risk of Meta's self-developed ASIC project. AMD may benefit as a result.