Conference Transcript - AMD 2026-06-02

Vivek Arya, Analyst — Bank of America

Okay. I guess it's still good morning. Good morning. Welcome back to this BFA Global Tech Conference. I'm Vivek Arya from BFA's Semiconductor Semicap Equipment Research Team. I'm really delighted to have the team from Advanced Micro Devices join us this morning, Gene Hu, Chief Financial Officer, and Matt Ramsey, Head of Investor Relations. And I'll go through my questions, but please feel free to raise your hand if you would like me to bring up something. But really warm welcome to you, Jean and Matt. Really appreciate you joining us at the conference. And I guess, you know, exciting times in AI and the semiconductor industry. So maybe, Jean, as a start, just walk us through your state of the union, right? The growth has been very strong, right, since the start of the year. What has surprised you? Which are the areas that you think you are seeing kind of the best growth right now? And which are the areas, you know, which have been kind of pushed back because of this?

Jean Hu, CFO

Yeah, first, thank you for having us. Thank you all for joining us. I think that the biggest change during the last few months is really the rise and inflection of agentic AI. You can see, you know, continued momentum from training to inference from, you know, AI adoption, experimentation to more adoption at a scale. So when you look at that, it's agentic AI. It's not about answering questions anymore. It's about orchestration. It's about database access and a lot of tool execution. And all of those require significant CPU performance. What we're seeing is very significant and incremental demand for our CPU platforms. That has been really exciting. At the same time, we also are seeing the economics of AI keep changing, right? With the token generation going up so quickly, all the customers are really focusing on performance TCO, and they are really trying to figure out how you use different compute to address different application and workload. So we see demand for GPU going up, CPU, and also a lot of other ASIC LPUs. I think from AMD's perspective, you know our Q1 performance. We had a record, you know, CPU performance, CPU business grew more than 50%. We guided the Q2, CPU performance is going to go up year-over-year 70%. That has been really exciting. So, all those things really benefit us because we have been investing in GPU, CPU, adaptive compute, also address literally end-to-end applications from data center to client to gaming. That feels like right now all the engines are really driving the business revenue growth very significantly.

Vivek Arya, Analyst — Bank of America

Got it. So, I think the growth in CPU has been kind of the biggest positive drivers this year. And, you know, we are kind of tracking this 2030 or, you know, end of the decade type of addressable opportunity, which I think you were the first to point out, right, would be 60 billion. And then said, you know, that doesn't sound that high enough. So they took it up to 100. Then you took it up to 120. And Jensen said, well, it could be even more than that, right, up to 200. What do you think is the difference between all these forecasts? You know, this is one of the most frequently asked questions, right, from the investment community. What is the right number? How does one kind of get to it? Is there like a simple unit? And are we just all using different ASPs to get to a different number? And everyone has the same unit growth. You're asking a lot of questions here.

Jean Hu, CFO

But I think maybe let's take a step back. You are absolutely right. AMD was the first one. Literally last year, we started to talk about how AI drives the demand of CPUs. So last November, when we had our Financial Analyst Day, we actually outlined how we think about this opportunity and the time. We basically said, okay, we're thinking three segments. One is the traditional general compute, which we're all very familiar with, has been driving the traditional enterprise application across the board. The second category is the head node, which is really the communication with the GPUs. You want speed to make sure you have the communication. We also outlined agentic AI last November, which is still very early, but our team already see the early signs of agentic AI. That has been the fastest growing market in our view. That's when we said, okay, we believe the TEM is going to grow 18% to 60 billion in 2030. Remember, the general purpose of the CPU used to be just a single digit growth. So that market expansion, we saw it earlier, but we never estimate it's going to be so fast. The pace and the speed of agentic AI adoption has been tremendous. So when you look at January, February, March, all the enterprise adoption started. You see Anthalpic OpenAI, their revenue has been going up very significantly. The demand for CPU continued to go up across all our customers. That's when we had our earnings call. we actually updated our market forecast to more than 120 billion. Frankly, it's still very early, right? When you think about genetic AI adoption, what we're seeing is with genetic AI, it's quite complex. When you have millions of operations you have to execute, when you have a lot of agents concurrently working on different tasks, you actually need very high-count CPUs. We don't know what other companies, how they think about TAM and SAM. For us, we go through the bottom-up and the top-down approach. We know at this particular point, we feel pretty good about more than 120 billion, but it's evolving so fast and more and more complex. You should expect for the agentic AI portion of the market because you have so many diverse workload, so complex, the ASP will continue to increase because increasingly you need a very high call count CPUs, high performance CPUs. Matt, I don't know if you have other you can add here.

Matt Ramsey, Head of Investor Relations

First off, thank you, Vivek, for hosting us and for you guys all coming. I think there's a couple of things, Vivek, that I would maybe add to Gene's comments. One is, I think, for this whole audience And us included, we were trying to figure out when was the primary driver of AI CapEx going to go from almost predominantly large model training and start the shift towards inference being a primary driver of CapEx. And we're seeing that happen in real time. And I think the more powerful thing for our business and maybe the more transformative thing architecturally is during that transition, you're seeing chatbot inference become agentic inference. And what agentic inference does as a workload, right? You daisy chain or concatenate all these automated agentic flows together. And between each inference task, there's a lot of CPU diverse work. So post-processing of data, figuring out what to tell the AI to do next, often based on the result of the prior inference. Where do I get the data from for the next step? Is it in a cloud? Is it in an ERP system, a payment system, a CRM system, wherever? Get all of that data, come back, post-process the data from that step and feed it into the next agentic step for the AI. And that workload is quite diverse. And that's what we're seeing driving the demand for Turin now in real time. And as the order book fills in for the 256 core 2 nanometer Venice parts that are going to launch in a couple of months and be the primary workhorse for next year, that's where we're seeing the order book really expand. Got it.

Vivek Arya, Analyst — Bank of America

Is there a way to, you know, segment that market, whatever it happens to be, right? $120 billion, right, plus, you know, in those three segments, Gene, that you described the kind of the traditional applications, the, you know, part of, let's call it part of the AI cluster, and then agentic kind of standalone CPUs?

Jean Hu, CFO

Yeah, I think a traditional segment, it's very clear. I think 2025, different third party would say that's a $25 billion to $30 billion market opportunity. It will continue to grow. As Matt has mentioned, you actually have an agent doing more work on the traditional database. So that traditional general purpose CPU is probably steady growth, but not as high. The head node, which is working with GPUs, you can see that's when people talk about the ratios. Traditionally, it's one head node CPU, manager, eight GPUs, and then become two to, yeah, it's getting more and more. So over time, that ratio is changing. So we do think the head node segment CPU will also grow very fast, much faster than the traditional general CPU. But the most exciting portion of the market is actually authentic AI. So, agentic AI, you actually, you are seeing agentic AI server rack sit in between the traditional servers and the GPUs. And those racks are handling all those different workloads to really make sure all the agentic agent works. That market, we think, by whatever the 120 or 200 billion market opportunity, is the majority of that large market.

Vivek Arya, Analyst — Bank of America

Over 50% of that market, you think, is that standard?

Jean Hu, CFO

Logetic, yes. It is still very early right now, but if you just think about what Matt said, how complex, how dynamic those workloads will be, and we do see significant productivity improvement, especially software engineering side. Those are very complex workloads. You really need different call counts. You need really high performance, high call counts. You also need, you know, simultaneous multi-thread, all those high-performance, you can manage, you know, millions of agents potentially.

Vivek Arya, Analyst — Bank of America

Got it. And the final question there is actually two last questions. One is x86 versus ARM. So if, let's say, that agentic opportunity does capture the dominant share of whatever that TAM number happens to be, What advantage, and if I dare ask, what disadvantage does x86 have versus ARM in capturing that?

Jean Hu, CFO

Yeah, I'll start. Matt can talk about the more technical side. The way AMD has been thinking about it has never been, oh, x86 architecture or ARM architecture. It's more about how we provide the best TCO for customers. So for us, the performance is number one. And secondly, what we have been trying to build is the breadth and the depth of the platform portfolio. So if you look at our CPU platform, we have gone through five generations at the Turin and Venice's next generation. We have the breadth from the call count to eight to 16 call count addressing enterprise applications to the Venice, we all have 256 call count. So for us, we have all different configuration design points to meet all the different computers to give them best TCOs. I don't know technically you can provide them.

Matt Ramsey, Head of Investor Relations

Yeah, Vivek, I think there, as Gene talked about, the three different buckets. The traditional server workloads for enterprise, I think there is an affinity towards x86 because of the code base. And many of those servers are deployed on-prem. Some of them are deployed in third-party cloud, but it's basically the same workload depending on where you want to deploy. And I think as these agents generate more traffic to all those traditional systems, then the x86 EQO system is well positioned there. Then you have the head nodes. I think that what you really need in head nodes is really high single-thread performance, really high bandwidth to, I don't know, it's not a technical term, but feed the beast of these really expensive accelerators that are in the box, right? We will do our own head nodes for Helios. I think our large competitor in their NVL racks will basically do their own head nodes. And then there's a bunch of different XPU programs that are going to be launched by the industry. And I think when we have those conversations with customers, it's much more about what is the performance of your CPU such that I get the best utilization out of this really expensive XPU that I'm buying. It's not an Intel or AMD or x86 versus ARM conversation. It's a what's the best server part. And then when you talk about these agentic racks, it's really about how many concurrent agents can you run per rack or per megawatt of compute. And as Gene mentioned, really, really high thread and core count products. I think our roadmap is differentiated there. And another thing that doesn't get mentioned, but I think is important, is if you think about the dollars of CapEx that are going to come into the server market, the mission critical nature of these systems, both head node and agentic racks, some of the RAS features and the security features of the x86 ecosystem. It's not an x86 architecture thing. It's just we and our x86 competitor have been put through the paces by every hyperscaler and most enterprises on all of these security features for a decade. And you might imagine you get into these automated flows where those agents have access to mission critical data and you want to really have servers that have robust security features there. So we feel we get brought into essentially every RFQ that's in the industry for these servers, and I think we're positioned to win a very high percentage of them.

Vivek Arya, Analyst — Bank of America

Now, your x86 competitor has their own fab, right? They are planning to add a lot more capacity on the server CPU side. I guess this year, every CPU is being sold, right? But do you think that, you know, there is a scope for share shifts, given that your competitor has incremental capacity to devote to this? Or do you think you will be adequately served by your foundry ecosystem?

Jean Hu, CFO

Yeah, we have been very pleased with our share gain trajectory. I think the last Q1 we just announced, we actually, from a value share perspective, we got to like 46%. When you think about this, our success is really tied together with TSMC. From day one, we have been using TSMC. We work together with our triplet design, with the packaging technology to come up with the best performance server platforms. That continues to benefit us going forward. We have been planning for this ramp since last year. So if you look at the Q1 performance and the Q2 guidance, when we guide year-for-year, 70% increase, and a lot of you actually know is, right, the wafer started six or nine months ago. So it is the early planning how we work with TMC to make sure we get support to continue to drive the ramp of the supply. The demand is tremendous. Supply is still tight. So I think for us, for this year, next year, every supply we can get, we can provide to our customers. We're going to continue to do that. It's the planning beyond the 2027 right now. For the longer term, I think we'll continue to work with the TSMC and prioritize data center as how we drive the business growth going forward.

Matt Ramsey, Head of Investor Relations

In fact, one little thing that I would add to what Gene mentioned there is when we have conversations with the investor community on this particular topic, I think one thing that I've noticed is supply is tight, right? Three nanometers tight. There's a lot of other areas that are tight. And I think we're very well positioned with the relationships Lisa has personally with the executives in that space to get maybe more than our fair share of the incremental. But it is tight. I think what I've noticed is maybe the investor scoping of what Lisa and the team initially asked for in 26 and 27, maybe didn't imagine how much growth we had already planned for in supply. So things are tight, but we already asked for and already been sort of quote unquote granted from TSMC, I think is a different, I think we're having the right conversation there, but maybe not at the right starting point from what we were sort of allocated initially.

Vivek Arya, Analyst — Bank of America

And then final one on the CPU side on price. So, you know, you mentioned 50% plus growth in Q1 and then 70% plus. I think there was a sense that one could sustain this, right, for the rest of the year. How much of this gene is pricing versus unit growth? And then let me just add quickly part B to that. As that agentic, right, that third segment becomes a bigger portion, do you think, you know, that can command much higher ASPs? when I talk with the ARM CAMP, you know, they're talking about ASPs in the $3,000, $4,000, $5,000 range, which is well above the ASPs, right, that AMD is able to get. So just unit versus ASP and just a trend of ASP.

Jean Hu, CFO

Yeah, I think, as you mentioned, both the more than 50% growth in Q1 and that we guide the Q2 to 70% year-over-year, more than 70% year-over-year increase, two-thirds of that actually are unit growth. So majority of our revenue growth actually come from unit expansion versus ASP increase. But your point on the ASP going forward, especially with agentic AI, is a great point. What we're seeing is we're at the early inning of agentic AI adoption. You can already see with the software engineering part of agentic work, autonomous agentic workflow, you really need a very high performance, high call counts, CPUs that tend to have higher ASP. So I think generation over generation, when we go to two nanometer with Venice and the future generation to handle complex workload to provide the performance, you tend to see the CPU price continue to increase. The other thing I would just say is because we have a really large platform, the CPU ASP is really determined by the mix and by the different configurations for different workloads. So it's not necessarily, you know, for enterprise, the per call ASP is very high, but because the call counts are relatively low, so ASP is relatively low, but the gross margin is great. So it's very nuanced from our business because how big our platform is and how complex our different design point we are helping our customers.

Vivek Arya, Analyst — Bank of America

You spent two-thirds of the time on CPU so let's talk about it.

Jean Hu, CFO

It's great.

Vivek Arya, Analyst — Bank of America

So you were at the start of the launch of a major rack scale system to your portfolio. Maybe give us a status update of how you're feeling when your competitor launched their first large scale-up product. It took a while for the industry to get ready, liquid cooling and all those things to get ready. So how do you think about your progress so far? How excited are you about the second half?

Jean Hu, CFO

Yeah, we are on track. We sampled MI450. We expect to be launching in second half for Q3 starting point and Q4. As you know, we have been preparing for this launch, for a long time. We acquired the ZT system in 2024. The whole reason we're acquiring the ZT system is to help us to add capabilities in system-level design. And we also have worked on the networking side. So the whole team has been working to prepare this launch. We know it's very hard. It's very complex, very hard. But from execution perspective, our team has been on track meticulously prepared for all different aspects of launch not only technology software side but more importantly the supply chain side how you make sure the design redundancy with all the components but also supplies even very small components you have to make sure you have supplies that has been the whole team's execution track record we feel pretty good right now.

Matt Ramsey, Head of Investor Relations

Yeah, Vivek, I think we're anticipating, as Gene said, we already have sampled and we have a number of customers that have full Helios racks in their own data center running their full production workload now and testing and doing all those things that you would expect us to be doing at this point in time. I mean, we learned, the customers earned a lot. We learned a lot from some folks that blazed the trail, as you mentioned. We're going to really We focus on a concentrated set of ODMs as we launch for the first number of months until we get up to scale. And not like a few systems, but billions of dollars of scale. And then we'll be expanding the ODM ecosystem pretty significantly as we move through next year and get towards the MI500 series and whatnot. So we feel good about where we are. The initial work that the customer base is doing in their own labs with sampled systems has gone very, very well. and so now it's about let's get we'll see a pretty significant jump in the fourth quarter of revenue and another fairly significant jump in Q1 and then we'll kind of go from there so it is wood so touch wood everything's going exactly as we'd hoped it goes I mean when you're doing a thing like this there's always day to day there's always something right but our job is to keep the duck calm on the top as we kick on the bottom and get ready to ramp this thing starting in Q3 Got it.

Vivek Arya, Analyst — Bank of America

You know, when you've been asked, Gene, or Lisa has been asked, you've always mentioned the opportunity for multi-gigawatt scale deployments. I think we have heard about, you know, two of them, OpenAI and Meta. You think there is still the scope for us to be, you know, pleasantly surprised with more such announcements, even for 27? Or you think that just given how tight the industry is, that more incremental announcements could be further spaced out than that?

Jean Hu, CFO

Yeah, we talked about we're really pleased with our partnership, very long-term partnership with both OpenAI and Meta. Last year, we established those relationships, and we actually see the forecast from those customers are actually above our original plan for 2027. I think one of the key milestones we're really focusing on this year is to continue to expand and deepen the customer adoption of IMI 450. We definitely expect there will be other meta gigawatt customers. We have both cross-the-ball, the hyperscale customers, the model companies, and even AI native companies we have been engaging, working with. I think it's important for us to continue to expand this customer base and with the largest scale deployment.

Vivek Arya, Analyst — Bank of America

Got it. Makes sense. And then how do you expect the two customers you have announced to allocate market share because they have a number of supplier options? I know you have a somewhat unique engagement with them through the granting of warrants and whatnot. But just if we set that aside, how is your visibility into, you know, getting, I think, the two gigawatt each, right, from those customers for next year?

Jean Hu, CFO

Yeah, Vivek, as you know, the lead time for IMI 450 is quite long. So we really have to start to plan and have the orders from customers for next year for, you know, the second half launch and the next year. I think the supply chain overall is tight next year, but since we have been preparing to support our customers, we do want to ensure we get supplies for what they need. I think both are coming higher than our original plan, but we are continuing to increase the supply. Those are two of our most important anchor customers. Of course, we also have a warrant, which we're going to be able to share the upside. If we get more revenue, our startup price is higher. They will share upside too. That is absolutely the common interest for both companies that want to drive the adoption of MI450. We feel pretty good with both of them. We think we can get the right supplies to support them.

Vivek Arya, Analyst — Bank of America

Do you think having someone like a TSMC is almost adding a level of discipline in the ecosystem? Because, you know, it's just harder to double count if everyone has to kind of go to the same source, right, to get – I mean, I know it sounds obvious, but do you see that also?

Matt Ramsey, Head of Investor Relations

They're quite disciplined. I think they'll continue to be. I mean, these are sensitive topics for us to talk about in these forums. But we really, really, really appreciate the support that TSMC is giving us as a partner and the way that they're working with us to bring more capacity online to support not just the Helios and 450 growth, but the significant server TAM expansion that we're seeing and planning for, not just for this year, but for all of next year and conversations going into 2028 on wafer capacity support demand. So we really appreciate the work that they're doing on our behalf, and I think that they're being, as they've always been, disciplined in the way that they bring capacity online and do their diligence two or three levels deep in the customer base to understand where the organic demand is coming from to support the capacity that they're bringing on.

Vivek Arya, Analyst — Bank of America

Makes sense. And then the final one, Gene, is on just memory cost inflation. I guess, you know, when you wake up and see DRAM, I'm sure DRAM price is not what you see when you wake up, but, you know, when you see that cost inflation every day, is that a good thing because it gives you more pricing power or is that a bad thing because now you have to absorb that cost and, you know, hunt for more supply? What are kind of the pros and cons of that memory cost inflation for you?

Jean Hu, CFO

It's really a great question. First, for us, right, we really want to make sure if there's a longer-term agreement with our suppliers, we can secure the capacity. That is the number one thing. When you have a larger business at our scale, you have to plan ahead. And secondly, you know, we think more strategically, if there's memory cost increase, we do need to figure out a way to share with our customers to absorb that increase together. I think the most important thing for us is we actually don't want to use the shortage of control of memory to just increase the price. We want to make sure customers help us to absolve the cost increase, but we are more strategic with the long-term relationship. I think from industry perspective, the memory cost increase at this kind of level, we have never seen, right? The price is really high. I think it does increase the cutback spending and the customers where they spend the cutbacks. I think in the longer term, just like all the industry, you always have a new capacity add up. You also have a new innovation on how you utilize memory more efficiently. It will figure out itself in the longer term. That's what we believe.

Vivek Arya, Analyst — Bank of America

But do you have long-term agreements in place for the majority of your memory needs? Or do you think that, you know, this is a cyclical high, right? And maybe, you know, there will be kind of more normalization of that input cost.

Jean Hu, CFO

From a planning perspective, because our manufacturing cycle is so long, If we plan for the MI450 ramp this year, we had to start to talk to our supplies last year or year before. Similar situation is right now, not only with a very tight supply environment, not only we're planning 2027, we're planning 2028. So for us to continue to make sure we can support our ambitious plan to grow the company, we have to plan ahead.

Matt Ramsey, Head of Investor Relations

Yeah, Vivek, in the server market and in the PC market, the vast majority of the DRAM is actually acquired by our OEM and ODM partners and the hyperscalers themselves, right? The DRAM doesn't run through our P&L. And we work really, really hard with all of the customer base to try to make sure that we're matching the memory supply that they're able to get and the CPU supply or the GPU supply that we're able to provide together to where there's not mixed matching of supply in the industry or hoarding of anything. And so we've been working really hard on that, but there are certainly increased input costs to end devices in certain parts of the consumer and gaming market where there have been some anticipated market impacts. And I think we've given you guys our current view of that in the guidance that we've talked about. But we're working really hard on behalf of the whole customer base to try to make sure that the memory pricing and the matching of components is relatively seamless in a time like this.

Vivek Arya, Analyst — Bank of America

And just a final question before we close. When you look across your customer base, Jean, how far is the visibility that they are willing to provide to you now? And when you get that, what are you doing differently in your business operationally to kind of deliver to those?

Jean Hu, CFO

Yeah, I think because the supply chain environment is really tight, customers really plan ahead. So we have a very good visibility into 2027 and beyond. I think our customers and ourselves especially when you think about the data center investment very large capex planning very very long planning cycle they actually plan way ahead 2027 we feel really good about both the visibility of the demand side and the visibility of the supply side and of course 2028 and beyond that's everybody's working on okay on that positive note thank you so much Jean, I appreciate you.