AMD Unveils Game-Changing AI Chip to Challenge Nvidia's Reign
Published on: March 10, 2024
AMD shares witnessed a significant surge, rising 9.9% to close at $128.37 on Thursday. This notable increase marks the stock's best performance since May and its highest closing since June. The momentum builds on the heels of AMD's latest venture into the artificial intelligence chip market, introducing products that stand in direct competition with Nvidia's offerings.
On Wednesday, AMD CEO Lisa Su unveiled the Instinct MI300X, a robust graphics processor tailored for AI-centric servers. This announcement was bolstered by commitments from tech giants Microsoft and Meta to integrate the new chip into their systems. Despite Nvidia's firm grip on the AI chip market over the past year, cloud providers and tech companies are actively seeking alternatives to reduce costs and enhance flexibility.
Thursday's rally in AMD's shares is a strong indicator of investor confidence in the company's potential to carve out a significant portion of the AI chip market from Nvidia. However, AMD's projected AI GPU sales for 2024 stand at $2 billion, which is modest compared to Nvidia's expected AI revenue.
Nvidia is anticipated to report over $16 billion in data center sales for the current quarter, a figure that encompasses a range of chip types beyond just AI GPUs. Nevertheless, AMD's latest high-end chip, slated for substantial shipping volumes next year, has sparked considerable interest.
Deutsche Bank analyst Ross Seymore, in his Thursday note, commended AMD's strategic positioning to capitalize on the growing AI Total Addressable Market (TAM). He praised the company's expanding customer partnerships and the competitive performance metrics of their products.
Citi analysts projected that AMD could secure about 10% of the total AI chip market. During the launch event, Su projected the total market for AI chips could reach $400 billion in the next four years, a figure double what the company previously estimated. Su expressed optimism, suggesting that AMD's success in the AI chip market does not necessarily hinge on outperforming Nvidia, given the market's vast potential size.
Su remarked that while Nvidia currently holds a majority share of the AI chip market, the potential growth to over $400 billion by 2027 offers ample opportunity for AMD to secure a substantial market share.