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AMD CFO Jean Hu confirmed earlier today that the firm is not starting new chip production for its China products despite being granted licenses by the Trump administration. Hu, along with AMD's vice president of investor relations, Matthew Ramsay, spoke at a Citigroup conference earlier today, where they discussed the firm's total addressable market for artificial intelligence and rising costs and AMD's ability to convert them into improved margins in an industry where gross margins drive stock performance.
AMD CFO Asserts AI Is In Early Stages & Skips Commenting On Whether It's A Bubble
Hu and Ramsay's talk at the Citigroup conference touched on a variety of topics. AMD, like NVIDIA, had to write off its China GPU inventory due to US license restrictions. When asked about whether AMD was modifying its China investments or considering a modified chip, Hu outlined that AMD was currently working out "if Chinese customers can be allowed to buy from U.S."
She added that AMD was "not starting new wafers for MI308" GPU. The MI308 is AMD's China-specific GPU, and the CFO added that the firm was ensuring that it can clear out its existing inventory. However, further investment in Chinese products depends on whether AMD "can get the license for our next generation," she said.
Ramsay was more forthcoming about the current market environment in China as he stated that "I think inside of China, there's a larger demand for AI processing silicon than there is ability to manufacture that silicon in China."
Chinese chip manufacturers are constrained from manufacturing leading-edge chips due to US sanctions, and the country's largest tech firm, Huawei, cannot procure leading-edge chips manufactured with US-origin technology. According to Ramsay, while his firm would love to cater to the Chinese AI chip demand, "getting visibility in the short term as to what that looks like is -- given all the moving parts, has been the challenge."
Later during the call, the AMD executives were asked about potential over-ordering of AI chips and their thoughts about the chatter surrounding an AI bubble. In response, Hu cited second-quarter capital expenditure of hyperscalers as well as "tremendous evidence for AI adoption." For Hu, this evidence demonstrates that the firms "have improved their return on their investment across not only their platforms" but have also improved their productivity.
The AMD CFO added that AI adoption has also helped AMD with productivity and personnel management. Citing anecdotal evidence, she outlined that "We hear a lot of other companies adopting AI." Hu believes that "we are still at a very early stage for AI adoption" and therefore it's too early to estimate the "magnitude" of its impact.
Crucially, she pivoted to AMD's CPU business and asserted that AI adoption also appears to be driving demand for general compute products. Hu admitted that "in the longer term, there are ups and downs over each cycle," yet maintained that AI is "probably once a lifetime opportunity we're seeing."
As for the rising AI chip prices, Hu outlined that AMD adds new features with every product, which means that the bill of materials goes up. While this leads to higher selling prices, AMD focuses on an improved total ownership cost for its customers, she said, adding that it is important for the firm to balance the ownership cost with gross margins.
Citi's Christopher Danley also asked the AMD executives about the factors that drive the firm's $500 billion total addressable market estimate for AI. In response, Ramsay explained that inference use cases, the size of customer data sets and their extension into industries are some driving factors.
"I've said this for a long time that I think as T goes to infinity, right, more and more CapEx and OpEx dollars in basically every industry goes into high-performance computing, AI is a significant inflection of that," he remarked.
The AMD executive asserted that AI is "the biggest inflection in computing since the invention of the Internet." As a result, he believes that AMD's TAM could extend beyond the $500 billion outlined by CEO Lisa Su earlier this year.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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