AMD stock plunges on preliminary Q3 results

Yahoo Finance Live anchors discuss the decline in stock for AMD after issuing preliminary third-quarter results.

Video Transcript

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JULIE HYMAN: We have to talk about the other big story that we're watching today. In the corporate side, but it also obviously has implications beyond that. We're talking about Advanced Micro Devices, AMD. It's down by 5% after an issue preliminary third quarter results that came in well below its initial guidance. Third quarter revenue is-- will come in at about $5.6 billion. That is more than $1 billion below estimates.

And guys, obviously, this is just the latest chip maker to come out and say this. AMD, like some of its peers, is blaming this on the PC market and saying also that it's going to write down $160 million worth of inventory pricing other issues. And [INAUDIBLE], this is-- the semiconductor industry is facing some big, big challenges here.

- Yeah. I think investors got a taste of what AMD said a couple of months ago. Intel shocked the hell out of investors in this market a couple of months ago in a report earnings. Really, I think gave guidance and results that nobody that has covered Intel, let's say, for the past 15 years has seen before. I mean, it was that bad, but you're seeing the market dynamics notably in the PC market really shift.

And I'm looking at a good note from Chris Danely. He's the semi analyst over at Citigroup, one of the best ones on the street. I love this guy's work. He thinks the next shoe to drop, the first shoe to drop was weakness in the PC market, but data center. He actually says he expects another correction in the PC end market and then the data center market, which was called out as an area of strength for AMD in the most recent quarter or in this press release they came out with, that might weaken going forward as companies look to tighten their belts. So you're still not coming or getting a sense off of this report, guys, that AMD will be back to accelerated growth in the first half of next year. And that is a big change in the investment thesis for a stock like this.

BRAD SMITH: Yeah. And the PC market, totally, makes sense in terms of the decline that's taking place there. You've got to shift swiftly to smartphones over an extended period of time, of course. But at the same time, it is a counter position that the consumers have said. We're going to take instead of carrying around a PC all the time or some type of larger device, it is something that you can carry around in your phone or put it in your pocket. And that shift is something that is so rattled the PC market in terms of the quantity that actually needs to be developed go into production.

But then what you're mentioning on the data center side is particularly interesting. And it's kind of one of the first times that we've heard that thesis that the data center market could see that type of pullback. Because if you think about the investment that is taking place within the data center from every single company essentially, as they were moving towards more applications that could allow them to connect with their customers, allow them to harness just being able to put every single thing piece of data on their company in the cloud, that broader swift to-- that move to the cloud had been so accelerated the question.

Now, I suppose is, where will that start to actually in terms of the growth decelerate? And that's perhaps where their thesis has the strongest point if you have a deceleration in the move to the cloud or the number of companies that are purchasing for more cloud space, what does that do to the data center? And then in tandem, what does that do to the number of chips that are necessary to continue to run the data center? At that point, it just becomes about the churn of the existing chips that are in the data center, too.

JULIE HYMAN: OK. One quick last point on this, and that is that many of the analysts' commentary, I was reading through, said even in a weakening environment, AMD should still gain share from Intel, which I thought was an interesting little point there.