In April 2025, the American government placed further restrictions on the export of chips to China, requiring firms such as AMD and Nvidia to secure a license prior to selling cutting-edge AI chips to Chinese buyers.
The goal is to prevent China from obtaining powerful processors for use in military or surveillance technologies. These shifts have already begun to hurt some of the biggest chipmakers.
On Tuesday, A.M.D. said it would lose about $1.5 billion in revenue this year due to those export controls. China accounts for about 25% of AMD's overall revenue. The company's finance chief said the impact would be felt mostly in the second and third quarters.
Even so, A.M.D. offered a robust outlook for the second quarter. It anticipates revenue of approximately $7.4 billion, more than Wall Street's forecast of $7.25 billion. Analysts think some customers may rush to buy chips before new rules make it harder or pricier. The early buying helped push up AMD's stock a little in after-hours trading.
It was also a reminder that the company's data center business, which includes AI chips, continues to grow well, CEO Lisa Su added in an interview. She projects AI chip sales will grow at a robust double-digit rate this year. Su acknowledged the new rules are a hurdle but said that as compared to the company's overall performance, it is manageable.
In April, AMD reported taking an $800 million charge due to new U.S. export restrictions. The company now expects its adjusted gross margin for the year to be around 43%, which is 11 percentage points lower when the charge is not factored in.
Other tech firms are having similar problems. Nvidia also said it would now need a license to sell its powerful A.I. chips to China, and it warned investors about a $5.5 billion impact. Analysts say big cloud companies like Microsoft and Meta are now buying chips well in advance to avoid any delays. But they also caution that such delays could prompt a sales lull in the third quarter, when stockpiles are full.
That said, there's not much to worry about here, and AMD's Q1 performance was excellent. Revenue increased 36 percent to $7.44 billion from the year-ago period. The data center unit, where most of its AI products reside, rose 57 percent to $3.7 billion. AMD's adjusted profit was 96 cents per share, which exceeded expectations of 94 cents.
A few other companies in the chip sector didn't fare as well. Marvell Technology postponed a big investor event because of the market uncertainty. The server maker Super Micro lowered its 2025 outlook. Shares of both companies declined after the updates.
While the $1.5 billion hit is a significant number, AMD maintains that it still has room to grow its AI chip business. Its second-quarter forecast and robust business from cloud providers suggest that demand for its technology is still strong.
