By Arsheeya Bajwa, Max A. Cherney

(Reuters) Advanced Devices predicted on Tuesday that revenue this year is $1.5 billion due to new chips in the chip, which requires companies to obtain licenses to ship advanced artificial intelligence processors to China.

However, it released its second-quarter revenue forecast, the highest estimate on Wall Street, which analysts attribute to customers buying more chips before tariffs. Its stock continued about 1% of its shares in after-hours trading, and has since risen 6% and down 3.5%.

Under Biden and Trump Administrations, the United States is becoming increasingly aggressive in exporting AI chips to China. These controls are designed to enable China to build advanced AI models and applications that, according to the United States, may have national security implications.

AMD CEO Lisa Su said on Tuesday’s call that much of the impact of curbs will affect the second and third quarters of the year. Despite new controls, Sue said she expects AI chip revenue from the company's data center business to grow through "strong double-digit" this year.

"It's definitely a headwind, but given all the other things we're doing, we think it's a headwind," she said.

AMD said in April that it would charge China $800 million in new chip exports from the United States. On Tuesday, it forecasts adjusted gross margin of 43%, down 11 percentage points from gross margin that excludes fees.

Like AMD, NVIDIA also warned Wall Street that it is now necessary to provide export licenses to China. NVIDIA therefore faces a $5.5 billion fee.

China accounts for about a quarter of AMD's total revenue, and the impact of export controls will reduce Wall Street's forecast by nearly 5% with revenue per LSEG data of $31.03 billion.

After the results, the $1.5 billion revenue in 2025 was due to new export controls in April, AMD's head of finance Jean Hu said on a conference call.

"The subtext is hard to miss; large and large scale would rather accelerate purchase orders than risk export casino bets were once the latest Chinese rules biting people."

“On the other hand, once those safe storage closets are full, the Q3 could be like the morning after Red Bull overeating…to keep pace with the backlog burning rate, while the other is Washington’s next tariff tweet.”

Despite China's growth

Still, optimistic forecasts suggest that the demand for AMD advanced processors is still powerful when powering Microsoft, Meta platform and other customers’ AI Systems. These cloud giants have recently stepped up their massive spending plans to build AI infrastructure.