In AMD’s case, top investor James Foord believes the post-earnings weakness reflects problems that investors should take seriously rather than a buying opportunity. Foord, who ranks among the top 2% of stock experts on TipRanks, says his biggest concern revolves around profitability, especially with AMD expecting adjusted gross margin to remain at 56% in Q3 after reaching the same level during Q2.
“The margin problem is the new bear case,” Foord argues, questioning why such rapid revenue growth has yet to translate into stronger profitability. As AMD expands beyond individual accelerators and sells more complete rack-scale systems, the company must shoulder additional integration, networking, and other costs. That leaves Foord concerned that booming AI demand could produce impressive sales figures without delivering the earnings leverage shareholders expect.
Profitability represents only one part of Foord’s bearish case, with several competitive threats adding to his concerns about AMD’s longer-term prospects. Chinese customers are shifting more AI spending toward domestic hardware, hyperscalers are developing their own processors, and falling inference costs could eventually reduce the computing hardware required for a given workload. Custom silicon presents another concern when some of AMD’s most important potential customers are simultaneously working to reduce their reliance on outside chip suppliers.
