TL;DR:
- AMD’s shares surged by over 9% due to its AI chip sales projection of $2 billion for the next year.
- Third-quarter earnings exceeded expectations, but Q4 guidance fell short of analyst estimates.
- Analysts emphasize the importance of AMD’s AI processors over its embedded business.
- AMD intensifies AI investments to compete with market leader Nvidia.
- MI300 processor positioned as a game-changer for AMD’s AI capabilities.
- AMD aims to accelerate AI platform deployment in data centers.
- Despite impressive growth, AMD lags behind Nvidia in share performance.
Main AI News:
In a resounding show of confidence, Advanced Micro Devices (AMD) witnessed a remarkable surge of more than 9% in its shares on Wednesday. This surge came in the wake of AMD’s announcement that it anticipates sales of AI-powered chips worth $2 billion next year, in a bid to bridge the gap with its market leader and rival, Nvidia (NVDA).
Despite slightly revising its guidance, AMD’s third-quarter earnings surpassed expectations. The company now projects a revenue of $6.1 billion for the last quarter of this year, with a margin of plus or minus $300 million. While this figure represents growth from the third quarter’s $5.8 billion, it falls short of the $6.4 billion estimated by analysts.
Interestingly, some analysts argue that AMD’s focus on AI processors carries more significance than its embedded business, catering to the industrial, automotive, and networking sectors. According to Wedbush Securities analyst Matt Bryson, the annual market value of AMD’s embedded business is under $10 billion. In contrast, Nvidia is poised to surpass that figure through quarterly GPU sales alone. This presents a substantial opportunity for AMD to leverage.
“In our perspective, the notably enhanced growth prospects for AMD’s AI products overshadow uncertainties about the trajectory and normalization of revenue from AMD’s embedded business, including Field Programmable Gate Arrays (FPGAs),” Bryson noted in a statement on Wednesday.
While AMD acknowledges the competitive landscape, it is intensifying its investments in artificial intelligence (AI) to narrow the gap with Nvidia. The company’s MI300 processor, touted as “the world’s most advanced accelerator for generative AI,” holds the potential to bolster AMD’s position. Lisa Su, AMD’s Chair and CEO, revealed that sales of AI-powered graphics processing units (GPUs) are expected to reach $2 billion next year during the company’s earnings call. Su emphasized AI as the pivotal technology shaping the future of computing and the most significant strategic growth avenue for AMD.
Furthermore, AMD aims to expedite the deployment of AI platforms on a large scale in data centers. The company has set its sights on shipping MI300 processors by the end of 2023, as Su disclosed at a product showcase in June.
Despite the challenges, AMD’s shares have posted a robust 69% increase year-to-date. While this growth is impressive, it pales in comparison to the meteoric rise of its competitor, Nvidia, which has nearly tripled in value this year. Notably, Nvidia holds the distinction of being the S&P 500’s top-performing stock in the current year.
Conclusion:
AMD’s bullish stance on AI and its projected $2 billion in AI chip sales signify the company’s commitment to stay competitive in the semiconductor market. While Q4 guidance may have fallen short, the emphasis on AI processors and strategic investments indicates a long-term growth strategy. However, AMD faces stiff competition from Nvidia, which has been a standout performer in the market. The semiconductor industry is witnessing a fierce battle for AI supremacy, with AMD making significant strides to close the gap.
