AMD posted record quarterly results and raised its outlook, but its stock tumbled after SpaceX announced it would use only Nvidia chips for its next-generation AI infrastructure, raising new questions about AMD's growth narrative
Advanced Micro Devices delivered its strongest quarterly performance in company history, reporting $11.5 billion in revenue for the second quarter of 2026-a 50% increase from the prior year. Data center sales more than doubled to $6.72 billion, driven by demand for AMD's Instinct GPUs and EPYC server processors. The company also raised its third-quarter revenue guidance to $13 billion, ahead of Wall Street's consensus estimate of $12.5 billion. Despite these results, AMD shares fell as much as 10% on August 5, reflecting investor concerns that went beyond the numbers.
SpaceX's Nvidia Decision Shakes AMD's AI Ambitions
The catalyst for the selloff was not AMD's earnings, but a major announcement from SpaceX during its first earnings call as a public company, held the same evening. CEO Elon Musk revealed that SpaceX would build its artificial intelligence infrastructure exclusively on Nvidia hardware, citing the Vera Rubin architecture as the best available. This marked a reversal from Musk's earlier comments suggesting his companies would source chips from both Nvidia and AMD.
The timing was especially damaging for AMD, which has spent the past year positioning itself as a credible alternative to Nvidia in the AI chip market. SpaceX's decision to go all-in on Nvidia undercut AMD's argument that it could win major AI customers. Nvidia shares rose about 4% on the news, while AMD's stock dropped sharply.
Starmind Satellites and the Lost Pipeline
SpaceX's partnership with Nvidia extends to the Starmind AI1 satellite project, which aims to run AI workloads directly in low Earth orbit. Each satellite will be equipped with Nvidia's Rubin GPUs and Vera CPUs, with deployments expected to begin as early as 2027. Analysts estimate that the potential chip demand from this initiative could eventually exceed $100 billion, representing a significant pipeline that AMD will now miss out on. While AMD had not booked any revenue from SpaceX, the loss is a blow to its growth narrative and its efforts to secure high-profile reference customers for its MI450 chips.
For context, the risk of losing major AI infrastructure deals is not unique to AMD. As Palantir's CEO recently warned, the competition for enterprise AI contracts is intensifying, and the long-term value capture remains uncertain for chipmakers and their customers alike.
Concentration Risk and Analyst Response
AMD's latest results also highlighted a growing concentration in its business. The data center division now accounts for roughly 58% of total revenue, while client and gaming segments have shown little growth. This makes AMD more vulnerable to large customer decisions, such as SpaceX's move to Nvidia. Investors tend to reward such concentration when the market is expanding, but punish it when a major buyer defects.
Despite the selloff, several major Wall Street firms raised their price targets for AMD following the report. Wells Fargo increased its target to $700, Jefferies to $650, and JPMorgan to $550. Citi and KeyBanc maintained bullish ratings, citing AMD's multiyear deployments with Meta, Microsoft, OpenAI, and Anthropic as evidence that the company remains a key player in the hyperscale AI buildout. CEO Lisa Su downplayed the SpaceX loss, expressing confidence in AMD's long-term relationships with other major customers.
What AMD Must Prove Next
Looking ahead, AMD has guided for data center revenue to more than double again in 2027 and expects overall revenue growth above its 35% target. Analysts believe that AI GPU demand could continue to grow at triple-digit rates, but AMD will need to secure new high-profile wins to replace the lost SpaceX narrative. The company's ability to diversify its revenue base and demonstrate that its MI450 chips can win business from other hyperscale customers will be critical for restoring investor confidence.
For investors, the episode underscores the risks of high expectations and concentrated growth stories in the semiconductor sector. AMD's valuation leaves little margin for error, and the loss of a major customer can trigger swift market reactions. The next key test will come when Nvidia reports its own results and when AMD must turn its 2027 guidance into actual booked revenue.
In the second quarter of 2026, AMD's $11.5 billion in revenue and $1.66 in adjusted earnings per share both exceeded analyst expectations, according to company filings. Data center revenue, which now makes up the majority of AMD's business, grew 107% year over year. The company's forward guidance for Q3 also topped consensus, but fell short of the most aggressive investor forecasts, which had anticipated as much as $14 billion in revenue.
AI chipmakers like AMD and Nvidia are competing for dominance in a market where a handful of large customers can drive enormous swings in demand and valuation. Winning or losing a single contract can reshape a company's growth trajectory, especially as more enterprises and government agencies invest in AI infrastructure. For investors, understanding the dynamics of customer concentration, reference wins, and the pace of AI adoption is essential for evaluating the risks and opportunities in this rapidly evolving sector.
