Reuters Advanced Micro Devices forecast AI chip sales on Tuesday that failed to impress investors, knocking its stock down about 7 in extended trade.

Chief Executive Officer Lisa Su told analysts on a conference call that AMD expects AI chip sales of roughly 4 billion for 2024, an increase of 500 million from its prior estimate for the year.

The increase of a half billion dollars was not enough to meet Wall Street39;s lofty expectations for AI chips. Nvidia has consistently crushed investor expectations because of soaring AI chip sales.

I think investors wanted to see a stronger demand pipeline from AIrelated products, but it is a slower ramp for them against Nvidia and perhaps they aren39;t making as much progress as the street hopes, Ben Bajarin, CEO of consulting firm Creative Strategies, said.

Enterprises rushing to adopt generative AI have prioritized spending on AI server chips, hitting demand for traditional server semiconductors, which constitute a large portion of AMD39;s revenue. These processors cannot effectively handle the complex tasks associated with AI.

Overall AI demand has exceeded anyone39;s expectations in 2024, Su said in the conference call.

While some of AMD39;s central processors CPUs are used in conjunction with AI chips, the ratio is skewed in favor of more advanced AI processors versus CPUs. AMD trails frontrunner Nvidia, which has about 80 of the booming market for artificial intelligence server semiconductors.

Nvidia shares fell 2.3…