Advanced Micro Devices forecast a strong fourth quarter driven by the planned launch of artificial-intelligence chips that could compete with Nvidia chips, with the company's CEO saying it sees an opportunity to sell its AI chips in China.

Shares were up roughly 3.5 percent in after-hours trading.

AMD CEO Lisa Su said AMD is set to ramp production of its MI300 artificial-intelligence chips in the fourth quarter. The MI300 AI accelerator chips are designed to compete against the advanced H100 chips already sold by Nvidia, though they are in short supply.

Su says customer interest in the company's MI300 series chips is very high and that AMDexpanded its work with top-tier cloud providers, large enterprises and numerous leading AI companies during the third quarter.

Investors are betting AMD could one day challenge Nvidia in the surging market for advanced AI chips when AMD releases a competing product later this year.

AMD's flagship chips exceed the performance limits for sale to China under US export control rules issued last year, and unlike Nvidia and Intel, the company has not yet created special chips for the Chinese market. On a conference call with investors, Su says that AMD sees sales potential in China's AI market.

“Our plan is to, of course, be fully compliant with US export controls. But we do believe there's an opportunity to develop product(s) for our customer set in China that is looking for AI solutions, and we'll continue to work in that direction,” Su adds.

Jenny Hardy, portfolio manager at GP Bullhound, which owns Nvidia and AMD stock, says that Nvidia still faces supply constraints, leaving an opening for AMD's chip.

“So if AMD can ramp production and launch those MI300 chips in the fourth quarter, they will likely see strong demand because plenty of people cannot get their hands on Nvidia chips. So we would assume that AMD can effectively kind of fill some of that supply-demand gap,” Hardy adds.