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Advanced Micro (AMD +5%) leaps today after edging past analyst earnings estimates in Q2 on a decent-sized revenue beat and in-line Q3 guidance. The CPU and GPU designer was amid a roughly 25% sell-off over the past few weeks, getting swept up by a broader market correction that took a particular toll on tech stocks. However, AMD's Q2 results underscored accelerating demand for AI, more than enough to reinvigorate the stock and help push its competitors, including NVIDIA (NVDA), Intel (INTC), and Arm Holdings plc (ARM), nicely higher today.

• AMD posted adjusted EPS of $0.69 in Q2 on revenue growth of 8.9% yr/yr to $5.84 bln, returning to delivering solid top-line upside following last quarter's in-line performance.
• AMD's Data Center segment delivered exceptional revenue growth in Q2, climbing by 115% yr/yr and 21% sequentially to $2.8 bln. The company's flagship GPU, the MI300, exceeded $1.0 bln in revs for the first time, aided by expanded use from Microsoft (MSFT). The MI300 has been enjoying such strong demand that AMD lifted its FY24 Data Center GPU revenue forecast to $4.5 bln from $4.0 bln. After this year, MI300's successor, the MI325X, is expected to ramp, possibly helping maintain Data Center's upward momentum.
• AMD's Client segment also delivered healthy growth, registering a 49% bump in revs yr/yr and 9% sequentially to $1.5 bln, bolstered by healthy PC demand. With AI PCs launching just this past month, AMD does not anticipate the category to significantly impact revs until more products are added that serve multiple price points, possibly during 2025. Still, AMD is heading into the seasonally strong PC months as back-to-school ramps.
• Gaming and Embedded segments were the usual laggards in Q2, declining by 59% and 41% yr/yr, respectively. In Gaming, semi-custom demand remained soft as gaming consoles entered their fifth year. AMD anticipates sales to be lower in 2H24 relative to 1H24. In Embedded, AMD reiterated that Q1 marked a bottom, noticing signs of order patterns improving during Q2, leading to a gradual recovery during 2H24.
• With Data Center and Client leading the charge, AMD anticipates another quarter of accelerating growth in Q3. The company projected revs of $6.4-7.0 bln, a 15% improvement yr/yr and sequentially at the midpoint.

AMD's Q2 results were noticeably better than last quarter, enough to reenergize its stock today. The company's lifted FY24 Data Center GPU revenue target also bodes well for NVDA, which reports JulQ numbers late next month. There is still an issue over AI monetization. Given the capital being poured into AI, customers must eventually see a healthy ROI. For this to unfold, end-consumer prices will likely need to rise but stay below the current cost of performing a certain task without AI.

Still, as AMD remarked during its Q2 call, the overall view on AI is that investing is a must; the potential is too massive to sit on the sidelines. Thus far, demand for AI has not shown any signs of slowing down. Unless this begins, AMD remains poised to rebound from its recent correction.