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(Reuters) -Advanced Micro Devices on Tuesday forecast a strong fourth quarter and expects to have artificial-intelligence hardware that can challenge Nvidia (NASDAQ:NVDA) chips by that quarter.
Shares were up roughly 3.5% in after-hours trading.
“Our AI engagements increased by more than seven times in the quarter as multiple customers initiated or expanded programs supporting future deployments of Instinct accelerators at scale,” said AMD CEO Lisa Su.
Su said AMD is set to ramp production of its MI300 artificial-intelligence chips in the fourth quarter. The MI300 AI accelerator chips are designed to compete against the advanced H100 chips already sold by Nvidia, though they are in short supply.
Investors are betting AMD could one day challenge Nvidia in the surging market for advanced AI chips when AMD releases a competing product later this year.
Revenue at AMD’s data center business fell 11% to $1.32 billion, while revenue at its client business fell 54% to $998 million from $2.2 billion a year ago.
Large cloud players like Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL) plan to ramp up spending on data centers in the second half of the year and that spending will skew toward AI chips and infrastructure, analysts said.
However, PC shipments decline has moderated and demand has started showing signs of improvement.
“Looking to the third quarter, we expect our Data Center and Client segment revenues to each grow by a double-digit percentage sequentially driven by increasing demand for our EPYC and Ryzen processors, partially offset by Gaming and Embedded segment declines,” said AMD finance chief Jean Hu.
The company forecast current-quarter revenue of about $5.7 billion, plus or minus $300 million. Analysts polled by Refinitiv expect revenue of $5.82 billion.
