Advanced Micro Devices (AMD) is projecting a significant $1.5 billion reduction in revenue for 2025 due to the latest U.S. government restrictions on exporting advanced AI chips to China. These restrictions require companies to obtain a license to ship advanced artificial intelligence processors to China. The impact of these restrictions is expected to be felt most strongly in the second and third quarters of the year.
The U.S. government's actions are aimed at curbing China's access to high-performance computing technology and slowing its advancements in AI and semiconductor technologies. These controls apply to chips capable of supporting generative AI applications and other high-performance computing functions deemed sensitive. The updated export rules also include controls on 24 types of semiconductor manufacturing equipment and three software tools for chip development. These measures reflect the ongoing trade tensions between the U.S. and China and the U.S. government's focus on national security concerns.
AMD's Chief Financial Officer, Jean Hu, confirmed that the $1.5 billion impact stems from the latest export rules enacted in April. This charge will shave roughly 5% off the Wall Street forecast for revenue of $31.03 billion. AMD has also announced it would take an $800 million charge tied to the new export tariffs. The company projects an adjusted gross margin of 43%, reflecting an 11-point drop when including the charge.
AMD is not the only company affected by these restrictions. Nvidia has also warned that it will now need an export license to China for its AI chips and faces a $5.5 billion charge as a result. The U.S. government also imposed export controls on Advanced Micro Devices' AI chips to China, which the company said could lead to up to $800 million in charges. These restrictions highlight the broader implications of U.S. policy changes aimed at restricting Beijing's access to high-performance computing technology.
Despite these challenges, AMD remains confident in its ability to grow its AI chip revenue from the data center segment by "strong double digits" in 2025. AMD CEO Lisa Su stated that the company believes that the headwinds from the export controls are well contained given everything else that the company has going on. AMD reported first-quarter revenue of $7.44 billion, marking a 36% year-on-year increase. The company's data center division contributed $3.7 billion in sales, a 57% increase from the previous year, largely driven by ongoing demand for AI-related compute infrastructure. For the second quarter, AMD anticipates revenue to remain steady at around $7.4 billion.
While the restrictions pose a setback, AMD's overall performance in AI and server processors signals ongoing demand strength in other areas. The company's optimistic forecast could help reinforce investor confidence in its ability to compete against Nvidia. However, analysts suggest that the forecast partially reflected frenzied customer buying to gobble up inventory ahead of potential U.S. tariffs.
The U.S. government's export controls on AI chips to China reflect a complex interplay of national security concerns, economic competition, and technological leadership. While these restrictions aim to slow China's progress in AI and advanced technologies, they also create challenges for U.S. chipmakers like AMD and Nvidia, who rely on the Chinese market for a significant portion of their revenue. China accounts for more than 24% of AMD's overall revenue. The situation highlights the delicate balance between protecting national interests and fostering innovation and growth in the semiconductor industry.
