The Rise of AMD in AI Beyond Data Centers

Last year, Advanced Micro Devices unveiled its MI300 series of data center chips tailored for processing AI workloads, with two key variants. The MI300X, a direct GPU competitor to Nvidia’s H100, and the MI300A, an accelerated processing unit amalgamating CPU and GPU hardware. With Nvidia struggling to meet chip demand, AMD sees a golden opportunity to snatch market share.

Notable collaborations with tech giants like Microsoft, Oracle, and Meta on MI300 GPU deployments for AI are already burgeoning. Microsoft is ahead in implementing the MI300X on its Azure cloud computing platform, offering developers access to cutting-edge AI models like OpenAI’s GPT-4.

AMD’s foresight predicts $3.5 billion in MI300 series sales for 2024, a notable leap from the previously estimated $2 billion, underlining the surging demand trajectory. The field remains ripe for AMD’s expansion, as evidenced by Nvidia’s $47.5 billion in data center revenue primarily fuelled by its H100.

AMD’s AI prospects stretch far wider than data centers, commanding a commanding 90% stake in AI-enabled personal computer chips with its Ryzen AI series, spanning CPUs, GPUs, and neural processing units (NPUs). The company reports millions of AI PCs already leveraging their chips from major manufacturers like Dell, Lenovo, Asus, and HP Inc.

Potential Revenue Surge for AMD

The semiconductor industry’s cyclical nature occasionally results in fluctuating growth patterns. As consumers don’t swiftly upgrade high-ticket items like computers and smartphones, there are bouts of revenue stagnation for firms like AMD.

Evidently, after soaring to $23.6 billion in revenue, a 44% increase in 2022, AMD faced a slight dip in 2023 to $22.7 billion, reflecting a 4% year-on-year decline. Additional strains from high inflation and rising interest rates further dampened consumer spending.

The commercial sector mirrors this challenge, where behemoths like Microsoft typically eschew annual hardware upgrades. However, Nvidia’s CEO Jensen Huang foresees a transformative paradigm with AI catalyzing a shift. An anticipated $1 trillion wave of data center infrastructure upgrades within four years to meet accelerated computing and AI demands signifies an impending growth phase for both Nvidia and AMD.

Analysts are foreseeing a $25.8 billion revenue for AMD in 2024, representing a solid 14% growth. Moving into 2025, forecasts propose an accelerated 26% growth, pegging revenue at $32.5 billion. Yet, with AMD’s enthusiastic lift in MI300 sales projections and robust sales in AI-powered computer chips, the company may well outperform these Wall Street projections.

Routinely surpassing expectations in the data center arena, Nvidia sets a high benchmark, while AMD’s MI300 sales are only kicking off their ascension.

Image source: Getty Images.

A Futuristic Finance: The Math Behind AMD’s Trillion-Dollar Course

Currently valued at $270 billion, AMD maintains a $22.7 billion revenue benchmark in 2023. With a price-to-sales (P/S) ratio of 11.9, the path to a $1 trillion valuation demands generating $84 billion in annual revenue.

To achieve this momentous goal over a decade, sustaining a modest 14% annual revenue growth till 2034 seems to be the formula. The near-term seems promising for AMD, with 2024 and 2025 forecasts aligning with this trajectory.

In a decade with commendable 15.6% compound annual revenue growth without AI, AMD’s prospects illuminated by the potential AI-driven surge are indeed tantalizing.

Unveiling Advanced Micro Devices’ Potential for Investors

Exploring Growth Opportunities

For Advanced Micro Devices (AMD), the present moment is akin to a swirling eddy in the river of financial markets. The company stands at the precipice of what could be heralded as its largest opportunity to date. With potential for expansion and growth looming, investors find themselves at the helm of uncertainty and excitement.

Path to Trillion-Dollar Valuation

The tantalizing prospect of exponential growth beckons, as AMD’s trajectory parallels that of industry titans like Nvidia, Microsoft, Apple, Amazon, Alphabet, and Meta—cult members of the prestigious trillion-dollar club. AMD, once the underdog, now dances on the cusp of a transformational journey, with investors jostling to ride the wave to prosperity.

The Prospect of Multiple Expansion

The canvas of possibilities stretches wide, with even the notion of multiple expansion painting a rosy picture. As AMD’s revenue unfurls at a pace that could outstrip analysts’ projections, the stock’s allure may entice investors to loosen their purse strings. For instance, contrasted with Nvidia’s lofty P/S ratio of 35.8—a figure triple that of AMD—opportunity beckons for the latter to ascend the ladder to a $1 trillion valuation.

Decision Point: Investing in Advanced Micro Devices

Before diving headlong into the thrall of Advanced Micro Devices’ stock, a moment of pause beckons. The Motley Fool Stock Advisor team, seasoned sentinels of the market, veer away from endorsing AMD in their top ten stock picks. Their divination suggests that amidst a sea of formidable contenders, other stocks may hold the swifter key to unlocking monumental returns in the foreseeable horizon.

Stock Advisor, a veritable guiding light for investors, invites speculation and contemplation. With a track record of tripling the S&P 500’s returns since 2002*, it serves as a compass in the often tumultuous waters of investment.

A Glimpse into the Future

As the sands of time continue their relentless march forward, the fate of Advanced Micro Devices hangs delicately in the balance. Will it embrace its destiny among the echelons of the trillion-dollar elite, or will the ripples of market forces consign it to a different fate? The answer lies shrouded in the behemoth of uncertainty, awaiting the steadfast resolve of investors to chart its arc.