AMD forecast, U.S. credit downgrade drags down chip stocks

Chip stocks dipped Wednesday, aft AMD's disappointing revenue forecast raised interest that fragility successful the PC marketplace and slower spending from businesses whitethorn beryllium poised to continue.

AMD shares dropped 7. Marvell fell astir 6%, Nvidia slid adjacent to 5% and Intel and Texas Instruments each declined much than 3%, falling much than the broader tech market.

For the 3rd quarter, AMD said late Tuesday that it expects $5.7 cardinal successful sales, portion analysts were looking for gross of $5.81 billion. At the aforesaid time, the institution said a "weaker PC market" dragged second-quarter gross down 54% successful its lawsuit segment. Sales successful the information halfway concern fell 11% successful portion due to the fact that of brushed endeavor demand, AMD said.

Semiconductor companies led a diminution successful tech stocks, arsenic the marketplace was deed by Fitch Ratings' downgrade of the United States' semipermanent overseas currency issuer default standing from AAA to AA+. Fitch attributed the downgrade to "expected fiscal deterioration implicit the adjacent 3 years," an erosion of governance and a increasing wide indebtedness burden.

The Nasdaq dropped 2.1% connected Wednesday, its second-worst time of the year.

Following AMD's net report, CEO Lisa Su told CNBC's "Squawk connected the Street" successful an interview connected Wednesday that the institution is coming retired of a "volatile cycle" for PCs, but she said AMD expects to spot maturation done the 2nd fractional of the year. Analysts astatine Jefferies reiterated their bargain standing connected the banal successful a enactment to clients and pointed to PC betterment materializing.

AMD is 1 of the fewer companies making high-end graphics processing units (GPUs) needed for artificial intelligence, and analysts are watching to spot if its server chips tin instrumentality marketplace stock distant from apical rival Intel.

"The thought is that your PC should beryllium your productivity instrumentality to assistance you truly signifier each aspects of your life, and generative AI is going to beryllium a large portion of that," Su told CNBC.

She said AMD is moving intimately with partners similar Microsoft to leverage AI and marque the computers much productive going forward.

During the quarter, AMD announced a caller chip that's intended to physique and tally the benignant of AI models that are astatine the bosom of applications similar OpenAI's fashionable chatbot ChatGPT. AMD said the MI300X spot was presently being provided to customers for sampling and that accumulation would ramp successful the 4th quarter.

"It's an breathtaking clip for the PCs," Su said.

— CNBC's Kif Leswing contributed to this report.