Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at AMD (NASDAQ:AMD) and the best and worst performers in the processors and graphics chips industry.
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
The 9 processors and graphics chips stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was 12.9% below.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
Amidst this news, processors and graphics chips stocks have had a rough stretch. On average, share prices are down 5.5% since the latest earnings results.
AMD (NASDAQ:AMD)
Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices or AMD (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.
AMD reported revenues of $5.84 billion, up 8.9% year on year. This print exceeded analysts’ expectations by 2%. Overall, it was a strong quarter for the company with a significant improvement in its gross margin.
“We delivered strong revenue and earnings growth in the second quarter driven by record Data Center segment revenue,” said AMD Chair and CEO Dr. Lisa Su.
AMD Total Revenue
Interestingly, the stock is up 14.9% since reporting and currently trades at $159.05.
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Nvidia reported revenues of $30.04 billion, up 122% year on year, outperforming analysts’ expectations by 4.5%. The business had an exceptional quarter with a significant improvement in its inventory levels and an impressive beat of analysts’ EPS estimates.
Nvidia Total Revenue
Nvidia achieved the biggest analyst estimates beat and fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 4.8% since reporting. It currently trades at $119.64.
A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Lattice Semiconductor reported revenues of $124.1 million, down 34.7% year on year, falling short of analysts’ expectations by 4.7%. It was a disappointing quarter as it posted underwhelming revenue guidance for the next quarter and a decline in its operating margin.
Lattice Semiconductor delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 5.4% since the results and currently trades at $51.95.
Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.
Qorvo reported revenues of $886.7 million, up 36.2% year on year. This print surpassed analysts’ expectations by 4.1%. It was a strong quarter as it also put up an impressive beat of analysts’ EPS estimates and a significant improvement in its operating margin.
The stock is down 13.8% since reporting and currently trades at $102.89.
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ:QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Qualcomm reported revenues of $9.39 billion, up 11.1% year on year. This number topped analysts’ expectations by 1.9%. It was a strong quarter as it also recorded a decent beat of analysts’ EPS estimates and strong sales guidance for the next quarter.
The stock is down 7.3% since reporting and currently trades at $167.49.
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