Advanced Micro Devices (AMD) released its first-quarter earnings after market close on Tuesday, reporting revenue and profit that surpassed analyst expectations. The company's second-quarter revenue forecast also exceeded Wall Street predictions.

Following the announcement, AMD's stock price surged dramatically, closing Wednesday with a gain of over 18% and reaching a new all-time high. Year-to-date, the stock has risen nearly 89%.

However, amidst AMD's substantial rally over the past two months, Cathie Wood's ARK Invest may be among the most disappointed. ARK funds collectively sold approximately $150 million worth of AMD shares, with sales occurring as recently as the day before the significant price surge, resulting in a complete miss of the rally.

Data center revenue experienced explosive growth this quarter. AMD reported earnings per share (EPS) of $1.37 and revenue of $10.25 billion. According to Bloomberg's consensus estimates, analysts had anticipated EPS of $1.28 and revenue of $9.89 billion. In the same quarter last year, the company reported EPS of $0.96 and revenue of $7.43 billion.

AMD provided second-quarter revenue guidance in the range of $10.9 billion to $11.5 billion. Wall Street's prior expectation was for revenue of $10.52 billion.

First-quarter data center revenue reached $5.8 billion, a 57% year-over-year increase, surpassing the expected $5.6 billion.

Financial Performance: - Q1 2026 revenue grew 38% year-over-year to $10.3 billion, exceeding guidance. - Free cash flow more than tripled, reaching a record $2.6 billion (25% of revenue). - Gross margin stood at 55%, a 170 basis point improvement year-over-year. - Data center revenue increased 57% year-over-year to a record $5.8 billion.

Business Highlights: - The data center segment is now the primary driver of revenue and profit growth. - Server CPU revenue grew over 50% year-over-year, marking the fourth consecutive quarter of record performance. - The strategic partnership with Meta was expanded to include provision of up to 6 gigawatts of AMD Instinct GPUs. - Sampling of the MI450 series GPUs commenced with major customers.

Financial Guidance: - Q2 2026 revenue is projected to be approximately $11.2 billion (a 46% year-over-year increase). - Second-quarter server CPU revenue is expected to grow over 70% year-over-year. - The company anticipates achieving hundreds of billions in annual data center AI revenue by 2027. - Gaming revenue in the second half of the year is projected to decline over 20% compared to the first half.

Opportunities: - The server CPU market is forecast to grow at over 35% annually, reaching over $1.2 trillion by 2030. - The 6th generation Epic Venice processor, based on Zen 6 architecture and 2nm process technology, is slated for upcoming release. - Strategic collaborations with Meta and OpenAI position AMD as a core AI infrastructure partner. - The company is working closely with supply chain partners to significantly increase wafer and backend capacity.

Risks: - Increased competitive pressure from ARM-based solutions and improved supply from x86 competitors. - Rising memory and component costs impacting PC and gaming demand in the second half. - Supply chain constraints related to limited wafer, backend capacity, and data center construction.

Prior to AMD's earnings release, Intel (INTC) reported results on April 23, also exceeding analyst expectations for revenue and profit, and providing a stronger-than-expected outlook for its data center business, which propelled its stock price up 24%.

Growing interest in AI agents—semi-autonomous or fully autonomous AI bots that perform tasks on behalf of users—is increasing the importance of CPUs in data centers. When agents take action, they utilize tools and software running on CPUs, leading to a significant rise in processor demand.

Like Intel, AMD sells its own CPU product lines, but unlike its competitor, it also offers high-performance GPUs for training and running AI models, providing an opportunity to attract a broader customer base. In preparation, AMD is readying the launch of its first rack-scale system, Helios, which will integrate the company's GPUs and CPUs into a larger server rack, similar to Nvidia's Vera Rubin-powered NVL72 rack system.

AMD's client segment revenue was $2.9 billion, above the expected $2.73 billion, while its gaming segment revenue reached $720 million, surpassing Wall Street's prior forecast of $668 million.

According to International Data Corporation (IDC) projections, global PC shipments are expected to decline 11.3% in 2026, impacted by persistent global memory shortages. Tablet shipments may also fall by 7.6%.

During Apple's (AAPL) second-quarter earnings call last week, CEO Tim Cook noted that rising memory prices could affect the company's margins in coming quarters.

Cathie Wood's Missed Opportunity Even prominent investors like Cathie Wood can sometimes watch major opportunities slip away. Based on ARK's daily trading disclosures, on May 5, ARK sold $15.6 million worth of AMD stock across its ARKK, ARKW, and ARKF ETFs, totaling 45,917 shares. This occurred on the same day AMD reported one of the strongest earnings results recently seen in the semiconductor memory sector.

More notably, ARK Invest had been systematically reducing its AMD position prior to this. Across multiple trading days in April and early May, ARK sold $79.9 million worth of AMD stock from the ARKK ETF alone, reallocating proceeds into Alphabet and Meta shares.

On April 24, ARK sold approximately $65.8 million in AMD stock, following earlier sales totaling around $10.5 million. The largest single-day sale in May occurred on May 1, amounting to roughly $58.09 million across multiple ETFs, involving 172,305 shares.

Consequently, between April and May, Cathie Wood's funds divested a total of $150 million in AMD stock, perfectly missing a nearly 24% price increase during that period.

The strategy appeared to involve locking in profits from AMD's impressive stock performance year-to-date and reallocating capital to companies perceived to have greater upside potential, including Alphabet, Meta, and more recently, Shopify.

For Cathie Wood, reducing the AMD position represented a planned rotation, given the substantial growth her holdings had already experienced. The timing of this rotation might have been precise or slightly premature, but the underlying logic—capturing excess gains to fund other confident investments—is central to ARK's strategy.