AMD Shares Face Pressure as AI Growth Trajectory Comes Under Scrutiny

Advanced Micro Devices (AMD) delivered a quarterly performance that surpassed Wall Street's expectations, yet the market's reaction was decidedly negative this week. Investor focus has shifted sharply from the solid historical results to concerns about the sustainability of the company's growth within the competitive artificial intelligence landscape. A significant portion of the positive surprise originated from a source that is difficult for the market to reliably price into future projections.

For the fourth quarter of 2025, AMD reported revenue of $10.27 billion, exceeding analyst consensus estimates of $9.67 billion. The company also beat earnings per share (EPS) forecasts, posting $1.53 against an expected $1.32.

However, a closer examination reveals a key nuance. According to Reuters, these results included an unexpected $390 million from AI chip sales to China, facilitated by a license approval. Without this contribution, the company's crucial growth engine—the Datacenter segment—would have shown signs of pressure during the period.

Key Financial Data:
- Q4 Revenue: $10.27 billion (Consensus: $9.67 billion)
- Q4 EPS: $1.53 (Consensus: $1.32)
- Q4 Datacenter Revenue: $5.38 billion (Consensus: $4.97 billion)
- Q1 Revenue Guidance: Approximately $9.8 billion (Street Estimate: $9.38 billion)

The High Bar for Datacenter Performance

AMD's Datacenter unit posted a 39% year-over-year increase in Q4 revenue, reaching $5.38 billion. While this growth appears robust and was above expectations, Reuters analysis indicates that without the China-related MI308 chip shipments, datacenter revenue would have been approximately $4.99 billion. This figure would have fallen short of a separate $5.07 billion estimate, highlighting the segment's sensitivity to exceptional, one-off events.

This is the core concern for investors: in the current AI investment cycle, merely "good" performance often fails to satisfy a market anticipating "exceptional" results. Chris Rolland, an analyst at Susquehanna, noted to CNBC that expectations were extremely elevated. The China-related boost made the overall earnings surprise less impressive than the headline numbers might suggest.

Should investors sell immediately? Or is it worth buying AMD?

First Quarter Guidance Fails to Excite

For the first quarter of 2026, AMD provided revenue guidance of roughly $9.8 billion (±$300 million). Although this outlook sits above the consensus estimate, it represents a sequential decline from Q4 levels. Data from Bloomberg, cited by Yahoo Finance, shows it also fell short of more optimistic projections that had surpassed $10 billion.

Furthermore, AMD forecast an adjusted gross margin of 55% for Q1. Reuters contrasted this with Nvidia's expected margins in the mid-70% range, underscoring a significant profitability gap. For shareholders, this serves as a clear reminder that while AMD is growing, its profit leverage appears less powerful compared to the AI sector's dominant player.

China remains an ongoing uncertainty. CEO Lisa Su stated that the Q1 forecast includes about $100 million in revenue from China, describing the situation as "dynamic."

Strategic Partnerships Meet Intensifying Competition

On a strategic front, AMD is expanding its AI footprint through major partnerships. A multi-year agreement with OpenAI, announced in October 2025, involves a 6-gigawatt installation of Instinct GPUs, according to CNBC. The first 1-gigawatt rollout is scheduled for the second half of 2026. OpenAI also holds an option to acquire up to a 10% stake in AMD. Separately, Oracle plans to deploy 50,000 AMD AI chips later this year.

Simultaneously, competitive pressures are mounting. Reuters reported that Nvidia made a significant move by securing most of the founders of startup Groq for $20 billion. Additionally, as noted by Yahoo Finance, major customers like Google, Amazon, and Microsoft are developing their own datacenter chips. This trend could exert long-term pricing pressure on AMD and reduce customer dependency.

The market sentiment shift is already evident in the share price. Over the past week, AMD's stock declined approximately 20%, demonstrating how quickly investor optimism can reverse when the forward outlook loses its sheen of perfection.