AMD's margins will remain under pressure as a result of the new US licensing requirements on the China-specific MI308 GPUs and the attendant charges that the chipmaker expects to incur in Q2, as per AMD's own guidance.
For the benefit of those who might not be aware, while announcing its earnings for Q1 2025, AMD revealed that it would likely incur $800 milllion in charges related to MI308 inventory write-offs, purchase commitments, and related reserves in the ongoing quarter.
What's more, AMD had also announced at the time that its Q2 gross margin would plunge to 43 percent vs. the 54 percent level that it likely would have reported in the absence of the MI308-related charges.
Given the one-time nature of these charges, the prevailing financial norm centers around ignoring such non-periodic, unusual items.
However, as noted by KeyBanc analyst John Vinh in his just-released note, the majority of Wall Street players have opted to incorporate these charges in their consensus estimates for AMD's second quarter, compelling Vinh to also comply with this evolving regimen in order to maintain broader consistency:
"Our prior estimate excluded these charges given they are one-time in nature; however, we are now including these charges to be consistent with Street consensus, as the majority of estimates include these charges. As such, we lower our 2Q25 EPS estimate to $0.47 vs. $0.90 prior vs. consensus of $0.57."
This means that AMD's Q2 2025 consensus EPS estimate has been exogenically depressed as most analysts have simply chosen to incorporate the one-time MI308-related charges in their computations. This potentially indicates some fears that these charges might not be of a one-time nature.
Meanwhile, as we noted in an earlier post, Kevin Hassett, the Director of the National Economic Council (NEC), recently implied that the Trump administration might be open to easing some China-specific chip export controls as part of efforts to reach a broader trade deal. Nonetheless, Hassett quickly shot down the possibility of easing existing restrictions on NVIDIA's China-geared GPU, the H20.
This suggests that the ongoing restrictions on AMD's MI308 GPUs are also likely to persist. Of course, a much more visible clarity will only be achieved once the US and China finalize their mutual trade deal.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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