Advanced Micro Devices is rapidly catching up with Nvidia.
Developing artificial intelligence (AI) software would not be possible without data centers and the powerful graphics processing chips (GPUs) inside them. Over the past 18 months, Nvidia (NVDA 0.89%) dominates the GPU industry with an impressive market share of up to 98%.
But competition inevitably emerged, and Advanced Micro Devices (AMD 0.08%) is working on an exciting GPU roadmap. The company held an “Advancing AI” event on October 10th, where CEO Lisa Su provided the latest information on its next-generation chips.
Advanced Micro Devices still lags behind Nvidia in the AI GPU market, but Su’s comments suggest the company is quickly catching up. Here’s why investors are excited.
Image source: Getty Images.
Advanced Micro Devices has been more than a year behind Nvidia in the AI GPU race
Nvidia’s H100 GPU has set the benchmark for AI training and AI inference. The chip began full-scale production in September 2022, but sales only increased in 2023, when AI fever hit the tech industry. While the H100 remains a popular product, Nvidia continues to suffer from supply constraints due to extremely high demand from major AI companies such as OpenAI, Amazon, and Microsoft.
These supply challenges have opened the door for competitors such as Advanced Micro Devices to steal market share. In late 2023, the company announced its own data center GPU called MI300X, specifically designed to compete with H100. So far, it has attracted some of Nvidia’s major customers, including Microsoft, Oracle, and Metaplatform.
In fact, Advanced Micro Devices says some of these customers are realizing performance and cost benefits using MI300X compared to H100. Although over a year late from its release date, the Challenger offered a great value. With the MI300 series, we expect the company’s GPU revenue to reach a record $4.5 billion in 2024. This estimate has already been raised twice.
However, NVIDIA still has an advantage. Earlier this year, the company began shipping its new H200 GPU, which can run AI inference nearly twice as fast as the H100. This meant that Advanced Micro Devices was still a step behind. But at the Advancing AI event, Lisa Su provided the latest details about her company’s new MI325X, which delivers 80% more high-bandwidth memory and 30% better inference performance than the H200.
This is great news, but shipping is expected to be in the first quarter of 2025.
The race to catch up doesn’t end here. Nvidia is now focused on its latest Blackwell chip architecture, paving the way for its biggest performance leap to date. The new GB200 NVL72 system can run AI inference at a whopping 30x the pace of the comparable H100 system. Individual GPU prices will be on par with the H100 (when it first launched), so Blackwell will be able to realize an incredible increase in cost efficiency.
In other words, Advanced Micro Device’s MI325X may be a better product than the H200, but it will fall far behind Nvidia’s latest hardware.
Advanced Micro Device’s Blackwell competitor is just around the corner
Now comes the exciting part. Lisa Su told the Advancing AI audience that the company is preparing to ship another new GPU called MI350X next year. Based on the new CDNA (compute DNA) 4 architecture, it delivers an incredible 35x performance increase compared to CDNA 3 chips like the original MI300X.
Advanced Micro Devices has stated that its MI350X will compete directly with Nvidia’s Blackwell chips.
Nvidia plans to ramp up shipments of Blackwell GPUs in the fourth quarter of fiscal 2025 (November to January), while Su said Advanced Micro Devices will begin shipping MI350X in the second half of 2025. That is, after falling behind Nvidia. After more than a year with MI300X, Advanced Micro Devices had the opportunity to cut its lead over Nvidia to just a few months with MI350X.
Advanced Micro Devices plans to report updated financial results in the coming weeks
The company is likely to provide further updates on the new chips during its third quarter 2024 (ending September 30) earnings call, scheduled for around October 29.
During the second quarter, Advanced Micro Devices generated a record $2.8 billion in data center revenue, an increase of 114% year over year. Another strong result could prompt management to raise its full-year GPU sales forecast to more than $4.5 billion. Considering the company’s track record in this area, there’s a good chance that will happen.
With modest earnings per share (EPS) of $0.82 over the past four quarters, Advanced Micro Devices stock currently trades at a very expensive price-to-earnings ratio (P/E) of 200.3. For reference, the Nasdaq 100 Technology Index is currently trading at a P/E ratio of 32.1.
However, Wall Street analysts believe the company could achieve $5.43 in EPS during 2025, pegging the stock at a more reasonable forward P/E of 30.6.
Advanced Micro Devices P/E ratio data by YCharts.
In other words, Advanced Micro Devices stock could be a great buy right now for investors who want to hold onto it for at least a few years, especially considering MI325X and MI350X, which will be released in 2025. be.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
