A smartphone with a displayed AMD logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration

By Max A. Cherney

NEW YORK (Reuters) -Advanced Micro Devices said on Tuesday that it expected annual data center chip revenue of $100 billion within the next five years, and its earnings to more than triple.

The Santa Clara, California-based chip designer's shares were up 4% in choppy post-market trading, after closing down 2.7% at $237.52.

The stock has risen 16% since October 6, when the company signed a lucrative multiyear deal with OpenAI that would bring in tens of billions of dollars in annual revenue.

While the deal is unlikely to dent Nvidia's dominance in AI chipmaking, it is seen as a big vote of confidence in AMD's chips, and the company's bullish financial projections on Tuesday should help assuage investor concern over AMD's ability to claw away business.

AMD expects the market for the company's data center chips to grow to $1 trillion by 2030, CEO Lisa Su said at its analyst day - its first such event in three years - in New York. Artificial intelligence will drive much of the growth to the trillion-dollar figure. That market includes AMD's plain processor and networking chips, along with its specialized AI chips, Su said.

"It's an exciting market," Su said. "There's no question, data center is the largest growth opportunity out there, and one that AMD is very, very well positioned for."

In the next three to five years, AMD expects 35% growth across its entire business each year and 60% in its data center business, finance chief Jean Hu said at the analyst day.

The company also expects earnings to rise to $20 a share in the same three-to-five-year period. LSEG estimates peg AMD's 2025 profit at $2.68 per share.

Jensen Huang, CEO of AMD archrival Nvidia, has said the broader AI infrastructure market will grow to $3 trillion to $4 trillion by 2030.

MORE SMALL M&A EXPECTED

AMD's next-generation MI400 series of AI chips is set to launch in 2026 and include several variants designed for scientific applications and for generative AI. Along with the MI400 chips, AMD is also planning to launch a complete server rack, similar to a product Nvidia sells called the GB200 NVL72.

In her opening remarks Su highlighted the company's recent AI-related acquisitions, including the server builder ZT Systems and a slew of smaller software companies. AMD has built "an M&A machine," Su said.

In recent months, AMD has acquired a batch of startups that focus on building software needed to run AI applications. On Monday, AMD said it bought MK1. The plan is to ensure AMD has access to the appropriate software and the people it needs to build its AI capabilities, Chief Strategy Officer Mat Hein told Reuters in an interview.

"We'll continue to do AI software tuck-ins," said Hein.

The chip designer forecast fourth-quarter revenue that topped Wall Street estimates. Demand for AI chips gave AMD executives a reason for optimism about the remainder of the year. The company's data center CPU business has also benefitted from the surge in AI-related spending.

(Reporting by Max A. Cherney in New York, Stephen Nellis in San Francisco and Juby Babu in Mexico City; Editing by Sayantani Ghosh and Matthew Lewis)