AMD's revenue warning indicates that the chip market is in a deep trough

AMD's preliminary third-quarter revenue was about $5.6 billion, lower than the estimated $6.71 billion, indicating that the chip slump may be much worse than expected. AMD shares fell 4% in after-hours trading, dragging Nvidia and Intel down more than 2%.

"The PC market was noticeably weaker this quarter, with macroeconomic conditions driving lower-than-expected PC demand," AMD CEO Su Zifeng said in a statement.

Runaway inflation and the reopening of offices and schools had resulted in people spending less on PCs than they did during the pandemic lockdown when many people bought computers for work and study because they stayed at home.

The Philadelphia Semiconductor Index, which tracks the 30 largest chip companies, has fallen 36.4% so far this year, after rising 41.2% in 2021.

"I think AMD is showing that no one is immune from the post-pandemic PC downturn, and those inventory corrections are affecting the company," said Anshel Sag, a chip analyst at Moor Insights & Strategy.

Su Zifeng said that AMD's data center, embedded and gaming divisions maintained strong growth.

AMD is the latest chipmaker hit by a downturn in the industry. Last week, memory chip maker Micron Technology warned of a more dire situation and said it would reduce capital expenditure investments in fiscal 2023 by more than 30%, totaling $8 billion. Both Nvidia and Intel delivered many worse-than-expected earnings in their latest reports.

AMD said its third-quarter earnings report will be officially released on November 1.

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