Google, AMD Stock Fall on Disappointing Sales as AI Slump Continues

Key Takeaways

• Google and AMD stock declined in response to concerns over their AI sales,
• Despite strong 2024 growth in its AI chip business, AMD forecasted a slowdown in the first quarter of 2025.
• Alphabet’s posted worse-than-expected revenues in the cloud and advanced computing segment.

Just days after Nvidia stock registered its biggest single-day price drop ever, Alphabet and AMD have been hit by similar losses as markets react to quarterly earnings released on Tuesday, Feb. 4.

Although overall earnings were roughly on target, both companies underperformed in the crucial data center segment, fueling concerns that massive investments in AI over the last two years have failed to deliver the expected results.

AI Sale Growth Stalls

After two years of unbridled growth, the release of DeepSeek last month threw cold water on the red-hot AI market, prompting investors to reconsider the sky-high valuations attributed to companies like Nvidia.

Amid this reckoning, analysts turn their attention to Big Tech earnings for clues as to whether the hype is justified. However, for AMD and Google, below-expected sales and ballooning capital expenditure triggered a major price drop in post-market trading.

After closing the day at $119.50, AMD stock declined nearly 10% overnight after the chipmaker predicted a decline in data center sales for the current quarter. It’s a similar story for Alphabet, which reported sluggish growth in cloud computing, sparking a 6.8% after-hours slump.

Data Center Investments

While AMD and Google occupy different positions in the AI ecosystem, both have significant growth prospects resting on the data center market.

AMD’s strategy centers on the high-end AI processors that it sells to data center operators. Google, on the other hand, provides cloud computing services to AI developers.

Both firms have invested billions of dollars to secure a slice of the AI pie. But as demonstrated by investors’ reaction to Wednesday’s earnings, there is a high bar to prove that such massive sums are justified.

Despite missing its earnings targets, Alphabet’s 2025 capital expenditure is set to balloon to  $75 billion as the company aims at aggressive AI expansion.

“That’s the opportunity space,” CEO Sundar Pichai said during his presentation.

“It’s as big as it comes and that’s why you’re seeing us invest to meet that moment.”

The Future of AI Chips

For AMD, the recent earnings call underscores the challenges of operating in a dynamic AI chip market.

While the company has positioned itself as a strong competitor to Nvidia, its latest projections indicate potential headwinds in the high-performance computing segment.

Alongside competition from Nvidia, the rise of custom silicon also threatens the firm’s AI business model, with data center operators including Amazon, Meta, and Microsoft increasingly pursuing their own independent AI chip initiatives.