AMD Faces Investor Pressure as Big Tech Embraces Custom AI Chips

AMD will face close scrutiny from investors when it reports its fourth-quarter results on Tuesday. As Big Tech companies like Microsoft, Amazon, and Meta invest in custom chips for artificial intelligence (AI), questions arise about AMD’s place in the AI chip market.

Although analysts expect AMD’s revenue to rise by over 22% to $7.53 billion for the quarter, the company’s growth prospects are overshadowed by the dominance of Nvidia in AI chips and the growing trend of tech giants developing custom silicon. Custom chips are designed specifically for particular companies, unlike off-the-shelf processors.

For instance, Chinese AI startup DeepSeek has advanced with AI models that may compete with Western counterparts at lower costs, raising concerns about spending on AI infrastructure, which has driven a rally in chipmaker stocks.

Meanwhile, companies like Microsoft, Amazon, and Meta are shifting toward creating their own silicon for processing large AI data, with new AI chip versions launched last year. This move has benefited Broadcom (AVGO.O) and Marvell Technology (MRVL.O), who supply custom AI processors to hyperscalers.

While Nvidia maintains a large share of the AI chip market, AMD is struggling to gain ground. The cost of switching chip providers is a significant hurdle. However, as Big Tech continues its massive AI investments, AMD’s AI chip sales could rise to as much as $10 billion in 2025—double the $5 billion forecast for 2024.

Despite this, supply issues for AI chips persist, with contract manufacturer TSMC (2330.TW) trying to ramp up production. Meanwhile, Nvidia’s continued ramp-up of its latest AI chips could affect AMD’s ability to secure manufacturing capacity.

In contrast, AMD’s personal computer unit is seeing strong growth, with a projected 33% increase to $1.94 billion in the fourth quarter, steadily taking market share from Intel.