Shares of modern micro devices (AMD 9.89%) rose 9.9% on Thursday after the chipmaker launched a series of new large accelerated processing units (APUs) designed to handle AI workloads that could compete with similar offerings Nvidia (NVDA 2.40%).
AMD “could grab a nice piece” of the AI chip market
At the company’s Advancing AI event yesterday, Advanced Micro CEO Lisa Su introduced the previously announced Instinct MI300X APUs, designed for artificial intelligence (AI)-focused servers. They combine the power of the company’s graphics processing units (GPUs) and central processing units (CPUs). Su added that both Microsoft And Meta have already committed to using the chip.
Nvidia currently dominates the industry with an estimated 80% market share in AI chips.
Su acknowledged as much in her presentation yesterday, but also noted that AMD believes it could “get a nice piece of what is expected to be a more than $400 billion market opportunity for AI chips by 2027.” – twice as large as the company had previously forecast. With such a large market, AMD doesn’t necessarily need to beat Nvidia, as there should be room for several chip stocks to win as the market grows.
What’s next for AMD investors?
In a note to clients early Thursday morning, analysts said City Estimates suggest that AMD could dominate around 10% of the total AI chip market when it starts shipping its new AI-centric products starting in 2024.
Consensus estimates on Wall Street currently expect AMD’s revenue to decline a modest 4% to under $23 billion in 2023. In comparison, Nvidia’s revenue is expected to more than double to nearly $59 billion this fiscal year.
Capturing even a 10% share of the fast-growing AI chip market represents a huge opportunity for AMD to re-accelerate its growth. The stock reacts accordingly today.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Steve Symington holds positions at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.