Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
Global Head of Investment Strategy
AMD just delivered a blockbuster quarter, blowing past expectations on the strength of booming data-centre sales and a dramatic revival in PC demand. But beneath these stellar results, investors face a looming challenge: Could escalating U.S.-China trade tensions disrupt AMD’s impressive growth trajectory?
AMD’s latest earnings numbers were impressive, easily beating Wall Street’s forecasts.
CEO Lisa Su hailed the quarter as "an outstanding start to 2025, driven by the power of our core products." Even AMD’s previously sluggish PC division came roaring back, posting a remarkable 68% increase, powered by surging demand for its Ryzen chips. Yet amid these celebrations, clouds are rapidly gathering.
Just as investors began applauding AMD’s performance, geopolitical realities emerged with a harsh clarity. Recently imposed U.S. restrictions on the export of advanced AI chips to China threaten to reduce AMD’s annual revenue by USD 1.5 billion, including an immediate USD 700 million shortfall in the upcoming quarter.
AMD also faces an additional USD 800 million in compliance-related costs and inventory adjustments tied to these export controls, putting notable pressure on future gross margins.
Despite these challenges, CEO Lisa Su remains optimistic, asserting: "We face headwinds from export controls, but powerful tailwinds from our products help offset these pressures." Nevertheless, geopolitical risks are increasingly critical for investors to factor into their decisions.
AMD remains resilient, forecasting next-quarter revenues between USD 7.1 billion and USD 7.7 billion, still ahead of analysts’ estimates. However, margin pressures highlight the tangible costs of geopolitical tensions.
Think of AMD like a star athlete encountering a sudden injury before the championship game: underlying strengths remain undeniable, but recovery and adaptability are crucial. Investors should closely monitor AMD’s strategic shift toward products less impacted by these trade restrictions, such as the new Instinct MI350 accelerators expected later this year.
AMD’s success at navigating this shifting landscape will define its investment potential over the next year.
AMD’s current difficulties extend across the semiconductor landscape, with Nvidia facing similar regulatory pressures. This escalating trade friction will likely intensify competition for unaffected markets, adding volatility across the entire semiconductor sector.
In short, innovation alone isn't enough—political and strategic agility will become equally critical for semiconductor companies moving forward.
Under CEO Lisa Su, AMD has become one of tech’s greatest turnaround stories, evolving from an industry underdog into a semiconductor powerhouse. Yet, the current geopolitical turbulence represents a pivotal moment: can AMD’s technical prowess overcome mounting political pressures?
Legendary investor Warren Buffett famously advises investors to "be greedy when others are fearful." AMD’s immediate challenges might raise investor caution—but also present a rare investment opportunity.
The chessboard has undeniably shifted, but AMD still has several strong moves left. As investors, perhaps the crucial question to ponder is this: Are today’s challenges at AMD merely temporary setbacks—or could they become tomorrow’s greatest opportunities?
For patient investors willing to embrace uncertainty, AMD’s turbulence today may well become the strategic advantage of tomorrow.