AI Daily: AMD slides following results on China AI chip concerns

Catch up on the top artificial intelligence news and commentary by Wall Street analysts on publicly traded companies in the space with this daily recap compiled by The Fly:

AMD RESULTS: Shares of AMD (AMD) were under pressure following quarterly results as Wall Street analysts voiced concern as the company failed to deliver a clear forecast for resuming sales in China.  

AMD reported Q2 EPS of 48c, in line with consensus, and Q2 revenue of $7.69B, which was better than the expected $7.43B. “We delivered strong revenue growth in the second quarter led by record server and PC processor sales,” said Lisa Su, AMD chair and CEO. “We are seeing robust demand across our computing and AI product portfolio and are well positioned to deliver significant growth in the second half of the year, driven by the ramp of our AMD Instinct MI350 series accelerators and ongoing EPYC and Ryzen processor share gains.” AMD also said it sees Q3 revenue of $8.7B, plus or minus $300M. Consensus is $8.32B. The company sees Q3 gross margin 54%. “We achieved 32% year-over-year revenue growth and generated record free cash flow this quarter, reflecting our disciplined execution,” said Jean Hu, AMD EVP, CFO and treasurer. “Our strategic investments across hardware, software and systems position us well to support robust future growth and drive long-term shareholder value.”

Following the report, Morgan Stanley lowered the firm’s price target on AMD to $168 from $185 and keeps an Equal Weight rating on the shares. The quarter was strong across segments and revenue continues to be “quite strong, but it’s not clear that will be enough to keep the bulls in charge of the narrative,” the analyst tells investors. The timing of China resumption was “more vague than expected,” adds the analyst, who cites lower conviction in China demand and a lack of AI upside overall for the firm’s lowered price target.

Conversely, Northland raised the firm’s price target on AMD to $198 from $132 and keeps an Outperform rating on the shares. While AI revenue was impacted by export controls in the quarter, the firm expects AMD’s China AI revenue to come back in calendar year 2026 and contends that the strong momentum AMD is seeing in AI is “still not reflected in consensus estimates.”

In a similar vein, Benchmark raised the firm’s price target on AMD to $210 from $170 and keeps a Buy rating on the shares following what the firm calls a “strong” Q2 report and an “equally encouraging” Q3 outlook. If adjusting for the lost $700M of estimated Q2 China revenue, AMD’s upside “would have been even more dramatic,” the analyst tells investors.

$500B VALUATION: Microsoft (MSFT)-backed OpenAI is in early stage talks for a potential sale of stock for current and former employees at a valuation of roughly $500B, Bloomberg’s Shirin Ghaffary reports. People briefed on the discussions say the company is targeting a secondary stock sale in the “billions” of dollars, and existing investors, including Thrive Capital have approached OpenAI about buying some of the employee shares.

AI CHIPS: Two Chinese citizens located in California were arrested and charged will illegally shipping tens of millions of dollars’ worth of AI chips to China, including Nvidia (NVDA) H100s, from October 2022 through July 2025, Karen Freifeld of Reuters reports.

Meanwhile, in a blog post, the Nvidia wrote, “NVIDIA GPUs are at the heart of modern computing… To mitigate the risk of misuse, some pundits and policymakers propose requiring hardware “kill switches” or built-in controls that can remotely disable GPUs without user knowledge and consent. Some suspect they might already exist. NVIDIA GPUs do not and should not have kill switches and backdoors… Embedding backdoors and kill switches into chips would be a gift to hackers and hostile actors. It would undermine global digital infrastructure and fracture trust in U.S. technology. Established law wisely requires companies to fix vulnerabilities – not create them… Kill switches and built-in backdoors create single points of failure and violate the fundamental principles of cybersecurity… There are no back doors in NVIDIA chips. No kill switches. No spyware. That’s not how trustworthy systems are built – and never will be.”