Advanced Micro Devices (AMD) is advancing rapidly in a market dominated by Nvidia. The development of artificial intelligence (AI) software heavily relies on data centers featuring powerful graphics processing units (GPUs). Nvidia has held a commanding position in the GPU industry over the last 18 months, achieving up to a 98% market share. However, competitors were expected, and AMD is now rising to the challenge with an innovative GPU roadmap.
At the “Advancing AI” event on October 10, AMD’s CEO, Lisa Su, updated on AMD’s next-generation chips. Despite currently trailing Nvidia in the AI GPU market, Su suggested that AMD is making significant gains. AMD had been over a year behind Nvidia in the AI GPU sector. Nvidia’s H100 GPU established benchmarks in AI training and inference, becoming a high-demand product since 2023. Due to ongoing supply constraints, major AI companies like OpenAI, Amazon, and Microsoft have turned to alternatives like AMD’s data center GPU, the MI300X, launched in late 2023 to rival the H100.
AMD claims that some of Nvidia’s major customers, including Microsoft, Oracle, and Meta Platforms, are shifting due to performance and cost benefits offered by the MI300X. Despite launching its competing GPU later, AMD has forecasted that the MI300 series could help its GPU revenue reach a projected $4.5 billion in 2024, a number that has been adjusted upward twice already.
Nevertheless, Nvidia maintains a competitive edge, having introduced its H200 GPU earlier in the year, offering nearly double the AI inference speed of the H100. AMD remains behind, but at the Advancing AI event, Su announced new details about the MI325X, which boasts 80% more high-bandwidth memory and 30% improved inference performance over the H200. However, this product is not expected to ship until the first quarter of 2025.
Nvidia is focusing on its latest Blackwell chip architecture, which promises significant performance enhancements. Its new system, GB200 NVL72, can perform AI inference up to 30 times faster than the older H100 system. This development puts AMD’s MI325X in a challenging position, as it competes with Nvidia’s cutting-edge hardware.
AMD has positioned its upcoming MI350X, based on the new CDNA 4 architecture, as a direct competitor to Nvidia’s Blackwell chips. This new GPU promises a 35-fold performance increase over previous models, with shipments expected in the second half of 2025. This timeline indicates that AMD could close the gap with Nvidia, which intends to begin Blackwell GPU shipments in its fiscal fourth quarter of 2025.
AMD is anticipated to reveal its latest financial outcomes for the third quarter of 2024 around October 29, which may include updates on its new chips. In the second quarter, AMD achieved a record $2.8 billion in data center revenue, marking a 114% increase from the previous year. Such positive results may lead to an upward revision of its 2024 GPU sales forecast beyond the current $4.5 billion expectation.
Further, AMD’s stock is trading at a high price-to-earnings ratio of 200.3 due to relatively modest earnings per share (EPS) of $0.82 over the last four quarters, while the Nasdaq-100 technology index trades at a P/E of 32.1. However, analysts predict AMD could achieve an EPS of $5.43 in 2025, aligning the forward P/E ratio to a more reasonable 30.6. Consequently, AMD stock could be an attractive option for investors planning to hold for the long term, especially with the anticipated releases of the MI325X and MI350X in 2025.
