The heavy price of competition with Nvidia: the reasons for the fall of AMD stock

Stock AMD one of the prominent names in the world of chips and the company that is trying to become the main alternative to Nvidia in the hot race of artificial intelligence, fell by about 17% yesterday (Wed), after publishing stronger than expected reports and a forecast that exceeded market estimates. But on Wall Street, it turns out, it’s not always enough anymore.

In an era where everyone is looking for the next winner of the AI ​​revolution, investors demand from AMD not only beautiful numbers, but clear proof that it is really starting to take a significant place in a market where Nvidia still dominates. But this is exactly where the gap was created: behind the impressive results, the forward forecast transmitted a temporary slowdown and left the market with the feeling that the big breakthrough is not yet here.

In the fourth quarter, AMD recorded record revenues of $10.3 billion and adjusted earnings of $1.53 per share, results that beat analysts’ forecasts. The forecast it provided for the first quarter of 2026 was also positive on paper, with expected revenues of approximately $9.8 billion, slightly above market expectations. But the investors, as mentioned, looked less at what happened in the past quarter, and more at the message going forward: the forecast implies a decrease of about 5% compared to the previous quarter, at the exact moment when the market expects to see an increasing rate of growth in the field of artificial intelligence chips. In the fourth quarter itself, revenues actually increased by about 11% compared to the third quarter, but on the Wall Street of 2026, the main question is not how much the company grew yesterday, but whether it is accelerating fast enough for tomorrow.

The alternative to Nvidia, but the road there is full of tests

Despite the sharp fall, Wall Street is in no rush to eulogize AMD. Bank of America reiterated its “buy” recommendation and even raised the target price, claiming that the company continues to establish its position as the second most important supplier in the AI ​​chip market, along with consistent strengthening in the data center and server processor businesses. For them, this is a significant growth engine that gives AMD a stable base even as the competition in the accelerator market becomes more aggressive.

However, some analysts emphasize that AMD’s challenge is not only in growth, but also in the price it pays for it. Goldman Sachs pointed to the increase in operating expenses, which results from heavy investments in software development and AI infrastructure, a move designed to close gaps with Nvidia, but may weigh on profitability in the short term. Morgan Stanley chose to highlight a strong point: even in a season that is considered relatively weak, AMD managed to continue growing in the field of server processors, which they say indicates stable demand from the major cloud customers and that the company still holds strong cards beyond the AI ​​race itself.

AMD’s big bet on the second half

AMD’s big hope is mostly later this year. In the investor call, CEO Lisa Su emphasized that the demand for next-generation artificial intelligence servers is expected to strengthen in the second half of 2026, and that the company does not foresee supply limitations that would prevent it from increasing the volume of shipments. At the center is the Helios system, a new solution designed to integrate hundreds and thousands of chips in large computing arrays for data centers, and to offer an alternative to the giant systems currently led by Nvidia.

For AMD, this is a critical step: no longer selling a single chip, but an attempt to enter the world of complete solutions, where the really big deals are decided. But in the capital market, those timelines seem far off. Investors want to see tangible signs of orders already, not just promises for the second half. At Saxo Bank they described it graphically: it’s like a new restaurant that promises to be full next year, but investors want to see orders already for next week. The concern is that the gap between expectations and the actual rate of progress leaves AMD exposed to high volatility, especially at a time when any small slowdown quickly translates into market punishment.

The relationship with OpenAI also adds another layer of interest, but also of risk. The company is expected to deploy large computing clusters based on AMD chips as part of the expansion of its AI infrastructure, which may make it a major customer and provide significant proof of capability. On the other hand, analysts warn that too much dependence on one customer could make growth less stable, and increase the sensitivity to any changes in the investment decisions of the large cloud companies.

And China is also in the picture. Some of the performance in the fourth quarter was supported by shipments of chips adapted to the export restrictions, but AMD itself estimates that the revenues from this market will weaken already in the coming quarter. Added to this is the uncertainty surrounding future American regulation and the continuation of trade restrictions, which hover over all the chip manufacturers operating in the global arena.