AMD follows Intel’s lead in warning that the PC market is collapsing

The heating PC market is rapidly slowing down after a surge during the COVID-19 pandemic, and powerful chipmakers like AMD and Intel are feeling the pinch financially.

“We took a more cautious stance on the PC business” AMD CEO, Dr. Lisa Su said in an earnings call late Tuesday. “So a quarter ago we thought the PC business was going to go down, let’s call it high single digits [percentage]. And our current view of the PC business is that it’s going to go down, let’s call it the teenage years. [percentage]. “

PC weakness prompted AMD to rare-than-expected Q3 forecast, although data center chip sales estimates continue to grow strongly. AMD posted third-quarter revenue between $6.5 billion and $6.9 billion. The Street has projected sales of $6.8 billion. AMD forecasts third-quarter gross margin at 54, slightly below the 54.2% estimate.

AMD shares were down 5% in pre-market trading on Wednesday. The company has most visited bookmarks on Yahoo Financehighlighted investors’ concerns about AMD’s prospects, also including a warning that pressure on the PC market will persist into the fourth quarter.

A man checks power lines on a laptop's motherboard at a repair center in Colombo, Sri Lanka October 17, 2017. REUTERS / Dinuka Liyanawatte

A man checks power lines on a laptop’s motherboard at a repair center in Colombo, Sri Lanka October 17, 2017. REUTERS / Dinuka Liyanawatte

AMD’s warning comes after rival Intel previously told investors it expected this year’s total addressable PC market to drop by 10% amid disappointing second-quarter earnings. shock and full year cut from earnings guidance.

“We’ve seen major inventory adjustments from our clients” Intel CEO Pat Gelsinger said on Yahoo Finance Live.

Gelsinger said he believes the third quarter is bottom for his businesswith an improving trend in the fourth quarter when PCs are purchased for the holiday season.

Intel shares fell 8% on Friday following the disappointments.

The two chip giants’ comments shed more light on the challenging environment for PC makers and their vendors. Declining PC spending also raises the risk of lackluster quarters and outlooks from PC makers Dell and HP when they report in the coming weeks.

Worldwide shipments of traditional PCs fell 15.3% year-on-year to 71.3 million units in the second quarter, according to data from IDC. This marks the second straight quarter of lower PC shipments after two years of growth.

“Editing PC inventory can [continue] In our view, for several quarters, with PC supply chain inventory levels higher than 20 years, “Baird analyst Tristan Gerra wrote in a note to clients.” Seasonality for the first half of the year shows no short-term PC recovery, with the result being poor utilization challenging gross margin recovery. “

Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and more LinkedIn.

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