MW AMD's stock has surged ahead of earnings, but this analyst sees a problem ahead

By Britney Nguyen

AMD may not be able to sufficiently capture CPU upside because it doesn't manufacture its own chips, an analyst says

AMD, led by CEO Lisa Su, will report its first-quarter earnings results on Tuesday.

Advanced Micro Devices shares have run up on optimism for the company's server central processing units, but one analyst now isn't sure that it will be able to recognize much more upside from the trend.

Through Friday's close, AMD's stock $(AMD)$ had advanced 77% since the start of April, partly on CPU enthusiasm. But HSBC analyst Frank Lee thinks investors expecting an "upside earnings surprise" on Tuesday may be left disappointed.

The reason? Chip manufacturers are seeing so much demand that they can't make enough chips for every customer fast enough. And unlike fellow CPU designer Intel $(INTC)$, which can make its own chips, AMD depends on Taiwan Semiconductor Manufacturing $(TSM)$ for manufacturing supply.

The Taiwanese technology giant is expected to see capacity constraints tighten even more for the rest of 2026, Lee said - especially for its more advanced 3-nanometer process node.

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Lee downgraded AMD's stock from buy to hold in his Monday note. Shares fell 5.3% on the day.

Additionally, Lee lowered his estimates for AMD's revenue from graphics processing units in 2026 due to "increasing supply-chain uncertainty" for the ramp-up of its upcoming Instinct MI455 rack-scale servers.

On those points, Lee said he thinks AMD will be limited in its ability to "significantly surpass market expectations" for its revenue this year, despite the excitement around its recent stock momentum.

Still, Lee said it's possible AMD will see upside in 2027, as server CPU demand will likely remain robust due to "under-shipments" this year caused by tight supply.

AMD's next-generation GPUs and sixth-generation server CPUs will be built on TSMC's 2-nanometer node, and Lee expects the chip maker to increase capacity for that chip technology, as well as for its 3-nanometer node, through its manufacturing sites in Taiwan, Arizona and Japan.

Therefore, AMD's CPU constraints should start to ease in 2027, Lee said. Potential upside for the stock depends on what TSMC's foundry capacity looks like, however, and Lee said that will become more clear later this year.

AMD is expected to report revenue of $9.9 billion for the first quarter, according to analysts tracked by FactSet. Its data-center segment, which includes server CPUs and GPUs, is expected to see revenue of $5.6 billion for the March quarter, which would represent year-over-year growth of 53.4%, according to the FactSet consensus. For the second quarter, analysts are expecting revenue of $10.5 billion.

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-Britney Nguyen

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May 04, 2026 17:10 ET (21:10 GMT)

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