Advanced Micro Devices (AMD) saw its shares plummet more than 17% on February 4, closing at $200.19, marking the worst single-day drop since May 2017. The irony: the selloff came right after the chipmaker reported a fourth-quarter earnings beat against Wall Street consensus.
Earnings Beat, But Not Enough
AMD reported Q4 2025 revenue of $10.27 billion, up 34% year-over-year, and EPS of $1.53, both above consensus estimates of $9.67 billion and $1.32. Full-year revenue hit a record $34.6 billion with 50% gross margin. Data center revenue reached $5.4 billion in Q4 (+39% YoY) and $16.6 billion for the full year (+32% YoY).
The problem: investors wanted a blowout, not just a beat. With Microsoft, Meta, Google and others announcing tens of billions in AI infrastructure spending, many analysts had baked in even stronger guidance. When actual numbers merely exceeded consensus without blowing past expectations, disappointment triggered heavy selling.
Q1 2026 Guidance: Sequential Decline Rings Alarm
The real trigger was AMD's Q1 2026 guidance. The company forecast revenue of roughly $9.8 billion (+/- $300 million), above the prior consensus of $9.38 billion but down sequentially from Q4's $10.27 billion. Moreover, non-GAAP gross margin was guided at ~55%, below Q4's 57%.
Compared to Nvidia's consistent "beat-and-raise" pattern, AMD's outlook appeared conservative. Investors worried about slowing AI chip demand growth or AMD losing competitive ground in AI accelerators.
China Factor: MI308 Export Curbs Bite
A critical yet overlooked detail: AMD's MI308 AI chip shipments to China contributed about $390 million of Q4 revenue. Due to tightened US export controls, the company expects China-related revenue to plunge to ~$100 million in Q1. That $290 million gap explains most of the sequential revenue decline. Excluding China, AMD's core trajectory looks much stronger.
Throughout 2025, AMD recognized roughly $440 million in inventory and related charges due to US export controls on MI308. While Q4 benefited from a $360 million inventory reserve release booked earlier, export uncertainty remains a persistent overhang.
Hard to Replicate Q4's Large Deal Wave
Q4 2025 featured a wave of large deals: orders from OpenAI, Oracle, plus MI308 shipments to China. These one-off or seasonal factors inflated expectations. When Q1 guidance showed those tailwinds wouldn't repeat near-term, the market punished AMD disproportionately — a classic "high base" problem.
Macro Backdrop: AI Bubble Fears and Sector Rotation
AMD's rout wasn't isolated. The same day, the entire semiconductor sector slumped: Broadcom fell ~3.8%, Micron cratered 9.5%, Nvidia dropped 3.4%. The Philadelphia Semiconductor Index tumbled 347.18 points (-4.36%) to 7,619.16. Software stocks also sold off: Oracle -5.1%, CrowdStrike -1.51%. Fears that AI tools might disrupt traditional software models accelerated capital rotation out of tech.
CEO Lisa Su Fires Back: AI Demand 'Exploding'
Speaking on February 4, CEO Lisa Su defended the company: AI development is moving "faster than she ever imagined"; customer demand keeps climbing; data center business is "clearly accelerating" from Q4 to Q1; CPU demand is "explosive." She aimed to refocus market attention on structural AI demand beyond near-term guidance blips.
Analysts: Average Price Target Still $289
Despite the stock rout, Wall Street remains broadly bullish. UBS rates Buy with a cut target of $310 (from $330); BofA raised to $280; Wells Fargo Overweight $345; KeyBanc Overweight raised to $300; Mizuho Outperform lowered to $275; Benchmark Buy $325. The average analyst target of ~$289 suggests over 40% upside from the ~$200 close. Most analysts view the market's reaction to near-term guidance as excessive, and AMD's long-term AI/data center thesis intact.