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AMD's AI Strategy: Path to $1 Trillion Valuation

Published by MEXEM EUROPE

June 3, 2024 12:07 PM
(GMT+2)

Advanced Micro Devices {{ m-tag option="price" ticker="AMD" currency="USD" }} has recently unveiled its latest artificial intelligence processors and outlined its roadmap for AI chip development over the next two years. At the Computex technology trade show in Taipei, AMD's CEO Lisa Su introduced the MI325X accelerator, expected to be available in the fourth quarter of 2024. This move signifies AMD's aggressive push to compete with Nvidia {{ m-tag option="price" ticker="NVDA" currency="USD" }}, the current leader in AI semiconductors, commanding about 80% of the market share.

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Competitive Landscape
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Nvidia has been dominating the AI chip market, and to challenge this, AMD plans to release new AI chips annually. Lisa Su emphasized the importance of AI to AMD, stating, "AI is our number one priority as a company." The upcoming MI350 series, expected in 2025, promises to outperform the current MI300 series by 35 times in inference capabilities. Following this, the MI400 series, based on a new architecture called "Next," is scheduled for 2026.

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Stock Performance
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AMD's shares have more than doubled since the start of 2023, although this increase is modest compared to Nvidia's seven-fold rise in the same period. Despite this, AMD remains committed to an annual AI chip product cycle, mirroring Nvidia's strategy. AMD projects AI chip sales of around $4 billion for 2024, a $500 million increase from previous estimates.

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AMD's Broader Market Impact
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AMD also announced that its latest generation of central processor units (CPUs) would be available in the second half 2024. These CPUs, used alongside graphics processor units (GPUs), are crucial for data centers prioritizing AI capabilities. Furthermore, AMD introduced new neural processing units (NPUs) for on-device AI tasks, aiming to rejuvenate the PC market.

AMD's remarkable turnaround over the past decade under CEO Lisa Su is noteworthy. From near bankruptcy, AMD has grown to a market cap of nearly $275 billion.
To achieve a $1 trillion market cap by 2030, AMD needs to increase its market cap by an average of 24% annually.

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Challenges and Growth Prospects
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Despite its impressive growth, AMD faces challenges. In 2023 the company saw a 4% revenue decline, with gaming and embedded revenue dropping significantly. However, AMD's data center revenue grew by 80% in Q1 2024, indicating potential benefits from the high demand for AI chips. Analysts predict a long-term rise in demand, with AI chips expected to grow at a 38% compound annual growth rate (CAGR) through 2032.

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Future Outlook
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With the semiconductor industry projected to experience substantial growth, AMD is well-positioned to capitalize on the increasing demand for AI chips. While reaching a $1 trillion market cap by 2030 is not guaranteed, AMD will likely significantly exceed its current valuation, driven by continuous innovation and market expansion.

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‚ÄćThe information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions.

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