The good news: Advanced Micro Devices (AMD) first-quarter beat on Tuesday revealed a likely bottom in its struggling PC business. The not-as-good: The chipmaker won’t resume the kind of growth we’re used to until the second half of the year. Revenue fell 9% year over year to $5.35 billion, but outpaced the Street’s expectation of $5.3 billion, according to estimates compiled by Refinitiv. Adjusted earnings-per-share (EPS) fell 47% on annual basis, to 60 cents a share, slightly ahead of the 56 cents forecasted by analysts. Bottom line AMD’s better-than-expected results in the gaming and embedded (processors for industrial and commercial applications) segments of its business more than offset weakness in its data center and PC segments. However, the forward sales guidance fell short of expectations on the Street, sending shares down over 6% in the after hours. We see no need to rush in and buy the sell-off. AMD stock is still up about 30% this year. We were relieved to hear that management still views the first quarter as the bottom of the client segment (PC market) thanks to its inventory reduction efforts. Still our read, based on management’s call with investors, is that this is more of a second-half 2023 into 2024 story. Here’s why: Management sees some “modest” data center growth in the second quarter, but demand remains suppressed as a result of ongoing cloud optimization efforts. This isn’t surprising given similar commentary last week from Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN). In the second half of this year, we should see a stronger Genoa ramp and the beginning of the Bergamo chip ramp — two key growth drivers. In the fourth quarter, we’ll also see the ramp of AMD’s MI300, “the world’s first integrated data center CPU and GPU” designed for high-performance computing and AI workloads. As a result, we are reaffirming our 2 rating on the stock , believing that there is no rush to buy the dip; a better opportunity to buy more AMD stock will…
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