Advanced Micro Devices forecast third-quarter revenue above market estimates on Tuesday, banking on demand for its artificial intelligence chips staying strong.

Shares of the Santa Clara, California-based company rose more than 2% in extended trading.

A rise in the adoption of generative AI technology has driven demand for powerful chips capable of handling the specific processing requirements of applications such as OpenAI's ChatGPT. The frenzy of activity has boosted sales for AMD's AI chips.

AMD benefits from large cloud operators buying the company's AI and other chips. Some view the company as a viable alternative to Nvidia. Both Meta Platforms and Microsoft are customers of AMD's MI300 line of AI chips.

The personal computer market is also recovering after its worst slump in years as the addition of on-device AI features drives a resurgence in end-market demand, aiding sales for AMD, which is among the largest providers of PC chips.

The company forecast revenue of $6.7 billion, plus or minus $300 million, for the third quarter, compared with analysts' average estimate of $6.61 billion, according to LSEG data.

On an adjusted basis, the company forecast gross margin of about 53.5% for the third quarter, compared with estimates of 53.6%.

  - Reuters