Chip Maker AMD Prospers as Rival Intel Struggles

The company also issued a subdued outlook for the current quarter, projecting roughly $6.7 billion in sales. That figure fell short of Wall Street projections for sales of $6.84 billion. Unlike Intel, which cut its full-year outlook last week, AMD maintained its full-year sales outlook despite a weaker overall personal-computer market, citing its strength in other areas.

Chief Executive

Lisa Su

also said sales of graphics chips prized by PC gamers fell in the second quarter, reflecting pressure on consumer spending from the current economic slowdown.

AMD shares retreated more than 4% in after-hours trading amid the results.

Other chip makers also have struck a note of caution.

Qualcomm Inc.,

a supplier of chips for mobile phones, cut its smartphone-shipment forecast and gave a muted sales outlook last week.

AMD last week overtook Intel in market cap after its rival posted disappointing results and said it had suffered setbacks in introducing its newest chips for the booming server market. AMD said its sales for that segment advanced 83% to $1.5 billion. Intel had reported a 16% decline in its comparable business unit.

AMD’s new generations of chips for PCs and servers that populate massive data centers have been strong competitors to Intel’s offerings, allowing the company to take advantage of its rival’s missteps. AMD’s market share rose to almost 28% in the first quarter from about 21% the year before, according to Mercury Research figures. The company’s share in the data-center central-processing-unit market rose strongly in the second quarter, Ms. Su said on a call with analysts. Intel has almost all of the remainder of the market.

As demand surges, AMD is asking its manufacturing partners for more chip-making capacity, Ms. Su said in an interview. Unlike Intel, AMD designs but doesn’t manufacture its own chips, sending orders to contract chip makers to build them. Those contract chip-makers have been stretched by outsize demand during the global chip shortage over the past two years.

“One of our highest priorities is to build capacity for where we think our market share can go,” she said, adding that constraints on capacity were easing in the second half of this year and into next year.

While demand for servers has been healthy, several chip companies this year have been grappling with a PC market that slumped the most in years during the second quarter after booming during the pandemic. Intel expects PC shipments to fall about 10% this year. AMD expects an even-steeper slump, Ms. Su said Tuesday, with shipments retreating roughly 15% to around 290 million to 300 million units.

Despite the slowdown in key markets, the semiconductor industry is still in the midst of a protracted shortage. The shortage has affected customers in a range of industries, from the makers of cars to medical devices, among other products.

Beyond its recent strength in selling central processing units, the brains of modern computers, AMD under Ms. Su has built up its graphics-chip business, which competes against

Nvidia Corp.

, the largest chip maker in the U.S. by market value. It also supplies chips that power videogame consoles, including

Microsoft Corp.’s

Xbox and

Sony Group Corp.’s

PlayStation.

AMD added to its capabilities recently with its acquisition of Xilinx, which specializes in a kind of chip that can be reprogrammed and is commonly used in telecommunications equipment, jet fighters and medical devices.

The company said sales in its PC-chip division climbed 25% in the second quarter to $2.2 billion. The division that houses its chips for videogame consoles and graphics-processing chips recorded revenue of $1.7 billion, up 32%.

Write to Asa Fitch at [email protected]