(Bloomberg) -- Advanced Micro Devices Inc. shares pared losses Wednesday after optimism about new artificial intelligence processors helped investors look past a downbeat forecast for the first quarter.

Though revenue in the current period will be well short of analysts’ estimates, the company expects to get more than $3.5 billion this year from a line of so-called AI accelerators that was unveiled last month, up from an earlier projection of $2 billion. Such chips help companies develop AI models by bombarding them with data, and they’re in high demand. 

Speaking on Bloomberg Television, Chief Executive Officer Lisa Su said she’s confident about the relative merits of AMD’s new chips and that the overall market is at the beginning stages of a huge expansion. Total demand should improve in the second half of the year, and her company, which outsources manufacturing, has secured enough supply to be able to exceed that $3.5 billion AI target. 

“We’re planning for a much larger number as it relates to the supply chain,” she said. “We have good visibility in terms of exact orders for the next couple of quarters.” 

For now, AMD’s overall business remains sluggish. First-quarter revenue will be about $5.4 billion, the company said Tuesday. That missed the $5.77 billion analysts had estimated and echoed rival Intel Corp.’s downbeat view of the PC and data center chip markets. 

The outlook renewed concerns that customers are holding off on purchases in AMD’s core markets: PCs, servers, game consoles and programmable processors.

AMD’s stock had been one of the favorite picks of investors looking for ways to bet on AI computing. Its shares have been the second-best performing stock on the Philadelphia Stock Exchange Semiconductor Index this year after a similar performance in 2023.

After an early tumble on Wednesday, the stock began to recover. It was down 1.2% at $169.91 as of 2:55 p.m. in York. 

The big question is whether AMD’s MI300 processors can challenge the dominance of Nvidia Corp. and its H100. That company’s revenue doubled in the latest fiscal year, according to estimates. AMD’s increased forecast for the MI300 is a promising sign, but Wall Street has been predicting numbers as high as $8 billion, according to Chris Caso, an analyst at Wolfe Research.

Intel, meanwhile, has suffered tepid demand in the market for programmable processors, an area where it also competes with AMD. Those chips can have their function changed or updated even after they’ve been installed in electronic devices.

In its quarterly report last week, Intel said the lucrative market for data center processors is weakening as well. Three months ago, AMD had warned investors that demand for game console and embedded processors was slower. It reiterated that idea Tuesday, saying that those markets will remain sluggish this year.

AMD said that its gross margin — the percentage of sales remaining after deducting the cost of production — will be about 52% in the first quarter, in line with projections. 

Fourth-quarter earnings were 77 cents a share, excluding some items, matching estimates. Revenue was $6.17 billion, versus an average projection of $6.13 billion. 

AMD’s PC chip division had revenue of $1.46 billion, compared with a $1.51 billion estimate. Data center sales came in at $2.28 billion, just short of a $2.3 billion projection. Gaming computer-related revenue was $1.37 billion. Analysts had seen that division having sales of $1.25 billion.

The company is the second-largest maker of chips that go onto add-in graphics cards, which turn PCs into gaming machines. And it provides chips to both Sony Group Corp. and Microsoft Corp. for their consoles. Nvidia leads the market for PC add-in card chips.

The Santa Clara, California-based company is also Intel’s largest rival in computer processors, the main component of laptops, desktops and the server machines.

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