Advanced Micro Devices (AMD) has announced it could lose $1.5 billion in revenue in 2025 due to new U.S. rules that limit the export of advanced chips to China. The rules require companies like AMD to get special licenses before shipping artificial intelligence (AI) processors to China. The impact will mostly affect the second and third quarters of the year. Still, AMD expects strong demand for its chips and forecasted higher-than-expected revenue for the next quarter.
US Export Curbs Hit AMD’s AI Chip Sales
The U.S. government has placed tighter controls on AI chip exports to China. These controls aim to limit China’s progress in building powerful AI systems, which the U.S. sees as a national security risk. This policy began under the Trump administration and has continued under President Biden.
AMD now needs a license to ship its top AI processors to China. The company estimates that this rule alone will cost it $1.5 billion in lost sales over the year. In April, AMD already warned it would take an $800 million charge related to these export rules.
China is a key market for AMD. It makes up around 25% of the company’s total revenue. According to financial data from LSEG, the new export rules could reduce AMD’s projected 2025 revenue of $31 billion by about 5%.
Second-Quarter Forecast Beats Expectations
Despite the hit, AMD offered a strong forecast for the second quarter. It expects revenue to reach around $7.4 billion, plus or minus $300 million. That beats Wall Street’s average forecast of $7.25 billion.
Some analysts believe customers are rushing to buy AMD chips before the new rules take full effect. This may explain why second-quarter numbers are strong, even though future quarters could be harder.
Data Center and AI Business Still Growing
AMD CEO Lisa Su said the company still expects strong growth in its AI chip business this year. She noted that most of the impact from the export limits will show up in the second and third quarters. However, the company still predicts “strong double-digit” growth in AI chip sales from its data center division.
“It’s certainly a headwind,” Su said during a conference call, “but one which we think is well contained given everything else we have going on.”
Su also noted that there wasn’t much “tariff-related activity” in the first quarter, meaning the export rules had not yet caused major problems.
Gross Margin Takes a Hit
AMD now expects an adjusted gross margin of 43% for the year. That’s 11 percentage points lower than its gross margin before the export-related charge. A company’s gross margin is a key measure of how much money it keeps after costs.
Nvidia Faces Similar Challenges
AMD is not alone. Its rival, Nvidia, also needs a license to export AI chips to China. Nvidia warned investors it could take a $5.5 billion revenue hit due to the same U.S. rules.
Both companies are seeing big demand for chips that power AI systems. But the new limits could slow down their ability to sell in China, one of their largest markets.
Analysts Expect Stockpiling Ahead of Rules
Michael Schulman, chief investment officer at Running Point Capital, said big tech companies are likely buying AMD chips early to avoid problems later.
“The subtext is hard to miss,” he said. “Big cloud companies would rather speed up their chip orders than risk delays due to export licenses.”
He also warned that this buying rush may not last. “Once those closets are full, Q3 could feel like the morning after a Red Bull binge,” he added.
Strong Demand from Big Tech Companies
Despite these hurdles, demand for AMD’s advanced chips remains high. Tech giants like Microsoft and Meta Platforms are investing heavily in building AI systems. These systems rely on powerful chips like the ones AMD makes.
In February, AMD stopped giving specific forecasts for AI chip sales. But Su said the company expects “tens of billions” in AI chip sales in the coming years.
