Shares of Advanced Micro Devices fell sharply in early premarket trading on Wednesday after the chipmaker’s first-quarter revenue outlook failed to live up to the market’s loftiest expectations.

The sharp pullback in early Wednesday trading underscored a growing reality in the AI-driven chip rally: strong earnings are no longer sufficient when expectations are stretched to extremes.

The stock slid about 9% in premarket trading after the company’s first-quarter outlook failed to fully satisfy investors who had been positioned for an even more aggressive forecast, given the scale of global spending on artificial intelligence infrastructure. The selloff came despite AMD delivering a solid fourth quarter that beat Wall Street estimates and reinforced its status as one of the most important challengers to Nvidia in the AI chip market.

AMD reported fourth-quarter revenue of $10.27 billion, topping LSEG consensus estimates of $9.67 billion. The result capped a year in which the company benefited from surging demand for data-center processors, particularly graphics and accelerator chips used in AI training and inference.

For the first quarter, AMD projected revenue of $9.8 billion, plus or minus $300 million. While the midpoint was still above the broader market estimate of around $9.38 billion, some analysts had expected a more forceful signal that AI-related demand would drive a steeper sequential ramp.

That disconnect between expectations and guidance proved costly for the shares.

“Expectations were pretty sky high,” said Chris Rolland, a semiconductor analyst at Susquehanna, in comments on CNBC.

He added that AMD’s disclosure of China-related revenue shipments in the quarter, which were not fully reflected in analysts’ models, made the headline beat appear stronger than it otherwise would have been.

“When you account for that, the beat was far less substantial than we would’ve thought,” Rolland said.

China exposure and regulatory risk

The reference to China highlights a sensitive area for U.S. chipmakers. Export controls imposed by Washington have limited the types of advanced AI chips that can be sold into the Chinese market, forcing companies like AMD and Nvidia to redesign products to comply with restrictions.

Any revenue tied to China is closely watched by investors, both for sustainability and for the risk of further regulatory tightening. AMD did not provide extensive detail on how much of its recent growth was linked to China-specific products, but the mere presence of that revenue added complexity to the market’s assessment of underlying demand.

Despite the near-term disappointment, there was little indication that AMD’s longer-term AI story has weakened. Demand for its data-center products remains strong, and analysts say the company continues to signal large-scale deployments ahead.

Rolland noted that AMD has hinted at multi-gigawatt AI contracts, a scale that underscores how rapidly computing requirements are expanding as companies race to deploy and monetize AI systems.

That trajectory is reinforced by AMD’s recent strategic partnerships. In October, the company announced a landmark agreement with OpenAI, under which the ChatGPT developer could take up to a 10% equity stake in AMD. As part of the deal, OpenAI plans to deploy 6 gigawatts of AMD Instinct GPUs over several years, starting with an initial 1-gigawatt rollout in the second half of 2026.

The partnership positions AMD as a core supplier in one of the world’s most visible AI ecosystems and marks a significant endorsement of its hardware roadmap.

In addition, Oracle said it will deploy 50,000 AMD AI chips beginning later this year as it expands cloud capacity to meet rising demand for AI workloads from enterprise customers.

Valuation pressure in an AI market

AMD’s stock has more than doubled over the past year, fueled by optimism that it can capture meaningful share in a market long dominated by Nvidia. That rally, however, has also raised the bar for performance.

Investors are increasingly demanding not just growth, but clear evidence that AI-related revenue will scale rapidly enough to justify current valuations. Any hint of moderation — even in the context of a beat-and-raise quarter — risks triggering sharp reactions.

The response to AMD’s guidance mirrors a broader pattern across AI-linked stocks, where earnings season has become less about whether companies are benefiting from AI, and more about how quickly that benefit is accelerating.

Looking ahead, the focus will be on how quickly AMD can convert its growing list of AI partnerships into sustained revenue growth, particularly in its data-center segment. Investors will also watch for clearer disclosure around the mix of training versus inference workloads, competition with Nvidia’s next-generation chips, and the impact of export controls on international sales.

For now, Wednesday’s selloff suggests that the AI boom has entered a more demanding phase. For AMD, the long-term opportunity remains intact, but the market is signaling that optimism alone is no longer enough.

The U.S. labor market opened 2026 on a notably weak footing, with private-sector hiring barely registering in January and reinforcing signs that the economy has settled into a prolonged slowdown rather than a sharp downturn.

New data from payroll processor ADP show that employers added just 22,000 jobs during the month, a figure that fell short of already muted expectations and underscored how narrow the sources of job growth have become.

The January gain was lower than December’s downwardly revised 37,000 increase and well below the Dow Jones forecast of 45,000. The headline number also masks a deeper fragility in the job market. Without a surge of 74,000 hires in education and health services, private employment would have declined outright. That concentration highlights the extent to which hiring momentum is no longer broad-based, but instead relies heavily on one structurally resilient sector.

Health care and education have been the primary engines of U.S. job growth for more than a year, driven by demographic pressures, persistent staffing shortages, and steady demand that is relatively insulated from interest-rate cycles. January’s data show that this dynamic has not changed. By contrast, most other sectors either grew marginally or contracted, suggesting that businesses remain cautious about expanding payrolls amid uncertainty around demand, borrowing costs, and global trade conditions.

Outside health-related roles, the gains were modest. Financial activities added 14,000 jobs, pointing to selective hiring in areas such as insurance, real estate, and financial services, even as parts of the sector face pressure from volatile markets. Construction employment rose by 9,000, likely reflecting ongoing infrastructure projects and pockets of resilience in non-residential building, despite higher financing costs. Trade, transportation, and utilities, along with leisure and hospitality, each added just 4,000 jobs, a subdued showing for sectors that typically benefit from consumer strength.

Losses, however, were more pronounced. Professional and business services shed 57,000 jobs, the steepest decline among all categories. That sector, which includes consulting, legal services, and corporate support functions, is often seen as a bellwether for white-collar confidence. The drop suggests companies are trimming discretionary spending and delaying expansion plans.

Manufacturing employment fell by 8,000, extending a period of weakness tied to soft global demand, elevated borrowing costs, and lingering effects of supply chain realignments. The “other services” category, which includes personal and repair services, lost 13,000 jobs, adding to evidence that parts of the consumer-facing economy are under strain.

In net terms, virtually all job creation came from the services sector, and even there it was narrowly concentrated. Goods-producing industries continued to lag, reinforcing concerns that the U.S. economy lacks the breadth of growth typically associated with a healthy labor market.

Company size data adds another layer to the picture. Mid-sized firms, employing between 50 and 499 workers, accounted for all of January’s net job gains. Small businesses were flat, while large employers cut 18,000 positions. This pattern suggests that big companies, which tend to be more exposed to capital markets, global trade, and shareholder pressure, are actively managing costs and headcount. Small firms, often more sensitive to financing conditions, appear reluctant to hire, likely reflecting tighter credit and uncertain demand. The totals do not add up precisely because of rounding, ADP noted.

Wage growth offered little new comfort as pay for workers who stayed in their jobs rose 4.5%, unchanged from December. While that pace is well below the peaks seen in the immediate post-pandemic period, it remains above levels typically associated with the Federal Reserve’s inflation target. For policymakers, this combination of weak hiring and still-firm wage growth complicates the outlook: the labor market is cooling, but not in a way that clearly alleviates underlying price pressures.

The January ADP report continues a trend that defined much of 2025: a low-hire, low-fire environment. Employers appear unwilling to expand aggressively, yet layoffs remain relatively contained. This stasis suggests companies are waiting for clearer signals on the economic trajectory, including the direction of interest rates, fiscal policy, and global growth.

ADP’s data usually precedes the more closely watched nonfarm payrolls report from the Bureau of Labor Statistics, which provides a fuller picture of employment, wages, and participation. That release, normally due Friday, has again been delayed by a partial U.S. government shutdown, leaving markets and policymakers without a timely official snapshot of the labor market.

Overall, the latest figures point to an economy entering 2026 with limited momentum. Hiring is narrow, confidence among employers appears subdued, and job growth depends heavily on health care and education. With manufacturing and professional services under pressure and wage growth still elevated, the labor market offers little clarity for policymakers debating whether current conditions warrant patience or a shift toward additional support.