AMD Faces $1.5 Billion Revenue Loss Due to US Export Controls on Datacenter GPUs

The U.S. Department of Commerce's export controls on GPU compute engines, imposed in April, have significantly impacted AMD's datacenter GPU business. While these controls did not affect AMD’s first-quarter financial results, they have stripped $1.5 billion in projected revenue from 2025, with $700 million impacting the second quarter alone. This is a substantial blow, considering AMD originally projected $6.83 billion in global Instinct GPU sales for 2025, meaning 22 percent of its sales vanished. The loss is even more pronounced in terms of operating income, given the steep volume discounts that U.S.-based hyperscalers and cloud builders receive compared to their Chinese counterparts. To put this in perspective, Nvidia also faces challenges due to these export controls, though to a lesser extent. The company expects a writedown of around $5.5 million for its H20 and H800 GPU inventory, translating to a lost revenue of approximately $10.3 billion for fiscal 2026. However, this represents only 6.3 percent of Nvidia's projected datacenter sales for the year, which were estimated at $162.9 billion. Nvidia can compensate for this loss with large contracts, a luxury that AMD currently lacks. The export controls target "crippled" GPUs—devices with reduced performance capabilities designed to comply with regulations while still being usable. These GPUs command higher prices, making them a lucrative market. Despite this, Chinese researchers are finding ways to advance their high-performance computing (HPC) and artificial intelligence (AI) initiatives using older, albeit slower, GPU technologies. For example, using HiSilicon’s “DaVinci” Ascend GPUs, which are approximately equivalent to Nvidia’s A100 and AMD’s MI250, Chinese engineers can still achieve their goals with scaled-out clusters. This highlights the strategic challenge faced by Western companies in maintaining technological superiority while adhering to export restrictions. In Q1 2025, AMD reported sales of $7.44 billion, a 35.9 percent increase year-over-year and a modest 2.9 percent decline sequentially. The company's net income surged by 5.8X to $709 million, bolstered by strong product mix and profit margins from both datacenter and client compute segments. AMD's cash and investment reserves stand at $7.31 billion, providing a buffer for future challenges. AMD’s Data Center Group generated $3.67 billion in revenue, marking a 57.2 percent year-on-year increase but a 4.8 percent sequential drop. Operating income for the group rose 72.3 percent to $932 million, representing 25.4 percent of revenues. Within this segment, it is difficult to clearly distinguish between Epyc CPU and Instinct GPU sales, but AMD's financial statements provide some insights. After accounting for $45 million in Versal datacenter FPGA sales and $85 million in datacenter NICs and DPUs, we estimate that Instinct GPU sales were $1.16 billion, up 90 percent year-on-year but down 33.6 percent sequentially. Epyc CPU sales, in contrast, were $2.39 billion, up 46.6 percent year-on-year and 20.3 percent sequentially. The launch of the "Turin" Epyc 9005 processors in October 2024 has bolstered AMD's server market position, especially as companies upgrade their old server fleets to accommodate AI systems. Moving forward, based on comments from AMD CEO Lisa Su and CFO Jean Hu during the Q1 earnings call, we predict that Epyc CPU sales will outpace Instinct GPU sales for the remainder of the year. Our model forecasts around $8.52 billion in Epyc CPU sales for 2025, representing 21 percent growth, and $6.11 billion in Instinct GPU sales, showing 21.6 percent growth. This is a significant reduction from our original projection of $7.61 billion in Instinct GPU sales. Industry insiders note that the impact of export controls is uneven and highlights the competitive landscape where Nvidia's dominant market position offers more resilience. AMD, while highly innovative and competitive, faces a more acute challenge in balancing compliance with export controls and maintaining its growth trajectory. Additionally, the involvement of Middle Eastern oil-rich nations in funding tech advancements, such as Cerebras Systems and the Stargate Project by OpenAI, underscores the global nature of the tech race and the potential for new alliances that could shift the balance of power. In conclusion, while the export controls have dealt a significant blow to AMD’s datacenter GPU business, the company remains financially robust and continues to innovate. The broader geopolitical context, however, adds layers of complexity to the tech competition, emphasizing the need for continuous innovation and strategic partnerships.