Nvidia Analysis
(ticker NVDA)
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Teresa Poletti
Executives at Advanced Micro Devices Inc. made several bold statements on Tuesday regarding the company’s artificial intelligence accelerator chip, declaring that they are ready to take market share away from competitor Nvidia Corp. But for Wall Street analysts, these statements weren’t bold enough: the company provided an updated revenue forecast for its AI chip business, which merely met their expectations at $5 billion. Now investors are trying to determine whether this forecast is cause for concern or whether AMD could become a sleeper bet against Nvidia.
In after-hours trading on Tuesday, AMD (AMD) shares fell nearly 8%, closing the extended session at $153.57. Some investors had hoped that AMD would raise its outlook for artificial intelligence chips. At the same time, company executives acknowledged that the profitability of AMD’s family of graphics chips for artificial intelligence was below the company’s average.
See also: AMD Earnings: Stock Falls as AI Outlook Fails to Deliver Positive Results
How AMD plans to close the gap
“Based on everything we’re seeing, we’re very bullish on the market. When speaking with customers, we see significant investment in efforts to build the infrastructure needed for all artificial intelligence workloads,” AMD CEO Lisa Su told analysts during the company’s conference call when asked about the company’s AI chips. “And, on top of that, our product portfolio is getting stronger every year.”
Despite this, one analyst noted that, in his opinion, Nvidia (NVDA) still leads AMD in performance, even with its latest chips, and asked how AMD plans to close that gap. “Thanks to our accelerated roadmap, we’ve actually closed a significant portion of that gap,” Su said. “I think the MI325 is a great product. It will compete very well with the H200, and the MI350 series will compete very well with Blackwell,” she added, referring to Nvidia’s next-generation GPUs.
Number two behind Intel
Although the proof will come next year, investors should also remember that under Su, AMD became a viable number two behind Intel Corp. (INTC) in the data center market - a market Intel had almost completely dominated before AMD’s rise. That, too, took time: Su spent many quarters reassuring investors that enterprise customers would test AMD’s chips before fully committing to them.
“Growth is going well, and we’ll continue to earn the trust and partnerships of these major customers,” said Su, describing the AI chip market. “I’ll say that customers are very, very open to AMD. And we see that wherever we go, everyone is giving us a very good chance to earn their business, and that’s what we intend to do.”
After congratulating Su on her significant impact on the company during her 10 years in office, one analyst noted that when she took over as CEO, the stock was trading at around $3. That was before AMD re-entered the server business and when it was struggling with its own manufacturing assets.
Investors who doubt that AMD’s technology is good enough to compete with Nvidia might want to look back at the past decade and recall how its data center business got started - a business that grew by more than 100% this quarter. AMD appears poised to break away from Nvidia, and that would make it a serious No. 2 player in the artificial intelligence arena.
-Teresa Poletti
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