AMD challenges Nvidia for tech domination

In this article, we will cover Exness opinions alongside reporting from the Wall Street Journal, which is a commercial partner of Exness. Since ChatGPT reignited the A.I. revolution, tech companies have seen incredible gains, and we can all be sure that this is just the beginning of a tech-dominated market. Nvidia has enjoyed the lion’s share of media attention thanks to recent breakthroughs in generative AI, but Advanced Micro Devices (AMD) are now making a push for dominance.

After showcasing the Instinct MI300 series, said to be the world's most advanced accelerator for generative A.I., AMD stock started a bullish run, rising a whopping 58% to $127.76 (USD) per share in the last three weeks alone. There’s no doubt that AMD will have a place in the future of regenerative A.I. 

For now, AMD optimism is ripe in the market, but traders would be wise to dig deep into what’s coming in the A.I. sector. There are many challenges laying ahead for the 30-year old tech giant, but AMD seems ready to take on every obstacle. Here’s what the Wall Street Journal had to say about the future of AMD.

AMD’s Superchips Face a Trillion-Dollar Hurdle

New AI chips challenge market leader Nvidia on its home turf. Advanced Micro Devices got where it is now by outmaneuvering a rival more than 10 times its size. Now comes the hard part. The chipmaker more commonly known as AMD has managed to build up a substantial business in supplying server processor chips to tech giants that operate massive data centers. It has done this largely at the expense of Intel Corp., which controlled an estimated 99% of the server market before a series of missteps cost the storied Silicon Valley pioneer its lead in the most advanced chip manufacturing. AMD’s data-center revenue jumped 64% last year to $6 billion, while Intel’s data center sales slid 15% to $19.2 billion.

AMD is now setting its sights even higher. The company showed off its latest developments for data-center computing on Tuesday. Among those was a so-called “superchip” for high-performance computing, which combines a central processor with a graphics processor and memory in the same chip packaging. AMD also announced a graphics-processor based “accelerator” for AI uses in data centers. That pits it squarely against Nvidia in what has become the hottest segment of computing with the rise of generative artificial-intelligence technologies such as ChatGPT.

Tech giants such as Microsoft, Amazon and the parent companies of Google and Facebook are rapidly adopting generative AI into their networks, which would appear to make AMD’s latest chips a guaranteed success. But Nvidia has a very strong head start in this market, having spent years developing the underlying software code and other key technologies that will be challenging for rivals to overcome.

Furthermore, AMD’s latest data-center accelerator won’t exactly be striking while the iron is hot. CEO Lisa Su said Wednesday that the chip won’t begin “sampling” with major customers until the third quarter of this year, with production beginning in the fourth quarter. That suggests volume shipments might not really start until sometime around mid-2024. Analyst Stacy Rasgon of Bernstein wrote in a note Tuesday that this would be about 18 months after Nvidia’s competing product came to the market, and thus “a relatively late arrival and begging the question of how big the opportunity next year might really be,” for AMD.

AMD’s share price slipped nearly 4% following Tuesday’s event—the same day that Nvidia’s shares picked up enough gains to finally put the company’s market value over $1 trillion by the close. The two stocks have been the strongest performers on the PHLX Semiconductor Index this year. AMD’s shares had also jumped more than 19% since Nvidia’s blowout fiscal first-quarter report last month through Monday on the belief that the chipmaker would benefit from the same booming AI demand that is expected to nearly double Nvidia’s data-center revenue in the current fiscal year.

But AMD’s outlook is more complicated. Tech giants facing their own cost pressures are cutting spending on other data-center components to pour more investment into generative AI. That has affected demand for some of AMD’s more traditional server processors. The company’s data-center segment saw no revenue growth on a year-over-year basis in the March quarter compared with 42% growth in the December period, and Wall Street is expecting a 7% decline for the current quarter before growth rebounds in the second half of the year. AMD’s data-center revenue is expected to rise by 11% for the full year—paltry compared with the 91% growth analysts polled by FactSet expect for Nvidia’s data-center sales in the company’s fiscal year that ends in January.

Still, Matt Ramsay of TD Cowen noted in a report after Tuesday’s event that AMD is “the increasingly obvious choice as the market looks for alternatives to the AI market leader Nvidia.” That alone will keep the company of high interest to the tech giants that are the chip industry’s most important customers. Reuters reported Wednesday that Amazon is “considering” AMD’s newest offerings, sending AMD shares higher pre-market. But AMD’s battle against Intel was helped greatly by the latter’s own mistakes. Nvidia has so far shown no propensity to give competitors that sort of help.

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By Dan Gallagher