On the first trading day after releasing its earnings report post-market on Tuesday, AMD's stock price gapped down 11.2% on Wednesday, hitting a daily low of over 17.7% during midday trading, and closed down 17.3%, marking the largest closing drop since May 2017, erasing all price gains since entering 2026, and refreshing the closing low since December 17, 2025.<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/abd4b2f6-e717-42f8-993e-040d42de8116.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/abd4b2f6-e717-42f8-993e-040d42de8116.jpeg"/>Overall, AMD's fourth-quarter performance exceeded Wall Street expectations, but why did the stock price plummet? Commentators believe part of the reason is that AMD's first-quarter revenue guidance did not meet some analysts' high expectations, and investors have doubts about AMD's ability to catch up with Nvidia in the fiercely competitive AI chip market.AMD's first-quarter revenue guidance median is approximately $9.8 billion, which, while higher than the nearly $9.4 billion consensus expectation from analysts, is lower than the record high revenue of $10.27 billion in the fourth quarter and does not reach the level of over $10 billion expected by some optimistic analysts.This weak guidance disappointed the market, as investors had originally hoped to see greater returns amid the AI spending boom. At the same time, while AMD reported increased revenue from older chips sold in China, it negatively impacted profit margins. Bernstein analyst Stacy Rasgon stated, &#34;Without the boost from the Chinese market, the overall performance actually did not exceed 'in line with expectations' by much,&#34; and pointed out that &#34;short-term AI business data has not shown a real inflection point in growth.&#34;This sharp decline also reflects that investors are reassessing valuations in the AI sector with a more cautious attitude. AMD is trading at a forward price-to-earnings ratio of 33.16 times, and at such a high valuation, any execution deviation could lead to severe adjustments.<h2>Strong Earnings Performance but Competition Concerns Remain</h2>The earnings report shows that AMD's revenue in the fourth quarter of last year grew by 34% year-on-year to $10.3 billion, exceeding the analyst consensus expectation of $9.65 billion. The adjusted earnings per share (EPS) for the quarter was $1.53, nearly 16% higher than the analyst expectation of $1.32.As a major beneficiary of AI spending, the data center business grew by 39% year-on-year in the fourth quarter to $5.38 billion, significantly surpassing the analyst expectation of $4.97 billion. Sales related to personal computers (PC) grew by 34% to $3.1 billion.Media reports suggest that the competitive pressure AMD faces in the booming AI chip market is becoming increasingly pronounced. Tech giants are increasingly using custom AI chips, and Google's multi-billion dollar advanced processor supply agreement with Anthropic adds pressure on AMD.AMD disclosed after the market on Tuesday that shipments of MI308 chips to Chinese customers generated $390 million in revenue in the fourth quarter, but it expects such sales to drop to about $100 million this quarter, indicating weakening demand for this increasingly outdated product. AMD stated that it is still seeking to sell the newer MI325 processor to China but has not yet obtained the necessary licenses<h2>Divergence of Wall Street Analysts' Opinions</h2>Chris Rolland from Susquehanna stated, &#34;First, expectations are quite high. Second, they announced revenue from shipments to the Chinese market this quarter, which was unexpected. This was not within market expectations, so when you take this into account, the actual extent of the outperformance is not as significant as we imagined.&#34;However, Rolland pointed out that demand for AMD's data center chips remains strong, and the company has also hinted at several gigawatts (GW) of large contracts in the future.AMD CEO Lisa Su maintained her usual optimistic tone during the earnings call, reiterating the company's forecast that AI revenue will reach tens of billions of dollars by 2027. She dismissed concerns about potential component shortages, stating that the company would be able to meet the anticipated increase in orders. She told analysts, &#34;There is no doubt that demand remains strong. Therefore, we are working with our supply chain partners to increase supply.&#34;Lisa Su indicated that demand for next-generation AI servers, including shipments to OpenAI and other customers, is expected to accelerate significantly in the second half of this year.AMD's recent agreements with OpenAI, Oracle, and the U.S. Department of Energy reflect the growing market interest in its MI series AI accelerators. In October of last year, AMD reached an agreement with OpenAI, which may hold a 10% stake in AMD and will deploy 6 GW of AMD Instinct GPUs over several years. Oracle also announced plans to deploy 50,000 AMD AI chips starting later this year.<h2>Decline or Buying Opportunity</h2>Despite the sharp decline in stock prices, some analysts believe this pullback may provide a buying opportunity for investors.Market observer Thomas Hughes noted that AMD's post-earnings drop appears to be a buying window that bulls desire. While the performance was better than consensus expectations, the whisper numbers' anticipated increase is expected to materialize later this year.According to MarketBeat tracking, the first batch of revised opinions includes numerous reaffirmed ratings and target prices, as well as some upward adjustments focusing on future targets. Future growth is expected to be significantly accelerated with the launch of the Helios rack-scale solution in the second half of this year. Most analysts have set AMD's target price between $280 and $300, indicating a potential upside of 40% to 50% from key support levels, with the possibility of reaching new historical highs.Investor reactions to AMD's performance stand in stark contrast to Super Micro Computer (SMCI), which saw a significant rebound in its stock price after announcing earnings, rising nearly 17.8% in early trading on Wednesday.Super Micro Computer raised its annual revenue guidance after hours on Tuesday, indicating continued strong demand for AI-optimized servers. This optimistic outlook highlights that downstream AI infrastructure spending remains robust, even as investors question the speed at which chip manufacturers can translate demand into short-term profit growth.AMD is trading at a high valuation of 40 times forward earnings, indicating that the market expects perfect execution of chip releases, infrastructure launches, and customer transactions, but key catalysts such as the MI450 and Helios rack-scale solutions are still ahead, and their potential to drive the market is increasing day by day

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Investors have doubts about AMD's ability to catch up with NVIDIA in the fiercely competitive AI chip market. Analysts point out that without a boost from the Chinese market, AMD's overall performance in the fourth quarter is not much better than market expectations, and the short-term AI business numbers have not shown a true inflection point in growth. Some analysts also believe that the decline may present a buying opportunity

- AMD's stock dropped 17.3% after reporting fourth-quarter results, marking the largest decline since May 2017 and erasing gains for 2026.  
- Despite exceeding revenue expectations, concerns over first-quarter guidance and competition in the AI chip market contributed to the decline.  
- Analysts view the dip as a potential buying opportunity, noting strong demand for AMD's data center chips and future growth prospects in AI-related sales.

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The worst since 2017! AMD plummets 17%, is the earnings report guidance the culprit?