Investors can relate. Last week Sun warned that it would report a huge loss for the summer quarter, news that sent shares skidding 17%. But despite the doom and gloom, Sun expects to keep getting server orders from banks and other customers. After all, with all those Wall Street traders dumping stocks, somebody’s still got to process the transactions. And that’s part of the reason why Advanced Micro Devices is optimistic that its new server chip, code-named Shanghai, will do well despite the downturn.

Over dinner Monday night at Zibibbo in Palo Alto, Sun Executive Vice President John Fowler predicted that he wouldn’t have trouble selling new servers equipped with the updated Opteron processor from fellow underdog AMD. Sun’s tests of Shanghai have gone swimmingly, he said, it has already begun shipping, and should appear in products in a few weeks. The new chip is designed to plug into the same equipment that used its predecessor, code-named Barcelona. Since Shanghai won’t suck more power than Barcelona and it will be priced to sell, it should be a no-brainer for customers who need to buy now. (Fowler’s pro-Shanghai feelings are echoed by several analysts, who say other server makers plan to build it into their products.)

Of course, we’ve all heard enough of these promises to take them with a grain of salt. After all, last year Barcelona was supposed to be a big hit — but when AMD released the chip later than expected and it ran at slower speeds, enthusiasm dimmed considerably, and some customers defected to Intel .

The message from AMD and friends continues to be that Barcelona’s mistakes cannot — will not — happen again. Sitting across the table from Fowler as he predicted smooth sailing for Shanghai was AMD’s Randy Allen, a senior VP who leads the processor business. Allen told me he realizes that AMD needs a trouble-free Shanghai launch, not only to put the ghosts of Barcelona to rest, but also to reassure customers like Sun about designing future products around AMD chips. (AMD’s next major chip overhaul that would require such redesigns is due in 2010.)

So what should investors make of all this?

It certainly does appear that things are looking up for AMD. In just the past couple of weeks, the company has reported gains in the graphics business and announced a huge cash infusion from Middle East investors that should allow it to spin off the manufacturing of its chips and keep those operations from dragging so much on earnings. It also restructured its executive lineup recently, installing new CEO Dirk Meyer and bringing in new engineering executives to make sure its chip blueprints work as advertised. After the Barcelona fiasco of 2007, it was clear that 2008 would be a rebuilding year. So far, AMD seems to have made good use of its time.

But the real test will come in 2009. That’s when those rebuilding efforts need to translate into sustained profitability and market share gains. In the first quarter, AMD should have a version of Shanghai for desktop computers. In 2009 AMD has also promised a laptop chip that will offer both low power and graphics performance for a price that blows Intel out of the water.

And if all that’s on track, we can also reasonably expect to hear more about AMD’s plans for ultra-portable devices. Allen confirmed to me that his team is working on a chip that will compete with Intel’s tiny, low-power Atom processor — but with a key difference: Intel plans for Atom to eventually make its way into GPS devices and smartphones, while AMD will aim its chips at the low-cost mini-laptops and simple desktops that industry insiders are calling “netbooks” and “nettops.”

The biggest driver of profitability for AMD, though, must be servers — and that means these Shanghai promises have to pan out in a tough economy. To gauge whether that’s happening, it’s a good idea to watch customers like Sun. If their server customers keep buying? Good sign. If more executives wind up in the fetal position? Bad. (NVDA) (MSFT) (D