Nvidia stock is set to rise 173% in 2024, but Wall Street says it’s another super semiconductor stock to buy your fist at.

Nvidia (NVDA 1.86%) CEO Jensen Huang believes data center operators will spend $1 trillion over the next five years on infrastructure upgrades to support the demand for artificial intelligence (AI) developers. Some of that money will go toward graphics processing units (GPUs), which are the chips of choice for AI training and AI inference.

Nvidia is a top supplier of data center GPUs, and its stock soared 173% in 2024 on strong sales growth. However, competition is increasing and Advanced Micro Devices (AMD 0.80%) has launched its own GPUs and has so far attracted some of Nvidia’s biggest customers.

The Wall Street Journal tracks 56 analysts covering AMD stock, and the overwhelming majority give the company the highest rating of “buy.” Needless to say, not a single analyst recommends selling. Here’s why AMD stock is a great buy right now, especially for investors who already own Nvidia.

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AMD’s AI opportunity extends beyond the data center

Nvidia’s flagship data center GPU, the H100, began production in September 2022 and had virtually no competition, allowing the company to capture an estimated 98% market share in 2023. That is until AMD launches its MI300X GPU in December, making 2024 adoption very promising despite being over a year late.

MI300X is currently used by many of Nvidia’s major customers, including Microsoft, Oracle, and Meta Platforms. AMD says many of them use MI300X to deliver improved performance and lower cost of ownership compared to H100. This is a positive sign for the company’s efforts to take market share from Nvidia.

AMD plans to start shipping the new MI325X to customers this quarter, which delivers up to 20% better AI inference performance than Nvidia’s H200 (which was replaced by H100 earlier this year). AI developers often rent computing power from data center operators on a minute-by-minute basis, so increased speeds can lead to significant cost savings.

But investors are already turning their attention to AMD’s MI350 series, which is expected to be available to customers in late 2025. It is based on a new architecture called CDNA (Compute DNA) 4, which delivers a 35x performance improvement compared to its predecessor. CDNA-3 based GPUs such as MI300X. The MI350 is AMD’s answer to Nvidia’s latest Blackwell-based GPUs, which (according to Jensen Huang) are the source of “insane” demand and are just beginning to ship.

But AI is rapidly moving from data centers to computers and devices. AMD’s new Ryzen AI 300 series central processors (CPUs), neural processors (NPUs), and GPUs are designed to handle AI workloads on-device, reducing reliance on external data centers and increasing Deliver a fast user experience.

Millions of Ryzen AI-powered PCs have already shipped from major manufacturers such as Lenovo, Microsoft, and HP. Lenovo and HP plan to triple the number of Ryzen AI devices they offer by the end of 2024, with more than 100 commercial platforms using AI chips expected to be available in 2025 as businesses look to upgrade to the latest technology. AMD predicts that will happen.

AMD’s AI-related revenue soars in Q3

AMD just announced its financial results for the third quarter of 2024 (ending September 28th), and the company achieved a record total revenue of $6.8 billion, an 18% increase year-over-year. But beneath the surface of that headline number were some even more powerful results thanks to AI.

AMD’s data center revenue rose 122% year over year to $3.5 billion, a record number, also driven by strong GPU sales. AMD CEO Lisa Su told investors that the company could generate $2 billion in annual revenue from data center GPUs by 2024, but that number is currently It is expected to exceed $5 billion.

AMD’s customer division, home to the Ryzen AI series of chips, saw revenue increase 29% to $1.9 billion. Lisa Su believes that the AI ​​PC cycle is still in the very early stages and investors should expect strong future growth in this area.

On the other hand, AMD delivered very weak results in the gaming sector. Sales fell 69% as demand for gaming consoles like Sony’s PlayStation 5 and Microsoft’s Xbox slowed, as well as desktop PC gamers waiting for AMD’s next-generation GPUs, which are scheduled to ship in 2025. did.

Wall Street is extremely bullish on AMD stock

AMD has achieved non-GAAP (adjusted) earnings per share of $3.00 over the past four quarters. Based on the stock price of $148.60 as of this writing, the price-to-earnings ratio (P/E) is 49.5. This makes it slightly cheaper than Nvidia stock, which trades at a P/E ratio of 63.1.

Additionally, Wall Street analysts (according to Yahoo) estimate that AMD will generate $5.20 in earnings per share in 2025, with a forward P/E ratio of just 28.6x. Given that the stock market is a forward-looking machine, that may be why analysts have reached such a bullish consensus on AMD.

Of 56 analysts surveyed by The Wall Street Journal, 39 give AMD stock the highest rating of “buy.” The remaining 8 are in the overweight (bullish) camp, while 9 recommend a hold.

I started by mentioning Jensen Huang’s prediction that data center operators will spend $1 trillion on AI infrastructure over the next five years. AMD believes the market for this chip alone will be worth $500 billion by 2028, with growth of an impressive 60% annually between now and then.

Nvidia may be the frontrunner to capture most of that value, but given AMD’s recent growth in data center GPU sales and its innovation pipeline, including the upcoming MI350, the company could see significant growth in the coming years. may pose a serious threat.

Nvidia’s market share will inevitably decline over time as competition increases, so for investors who already own the stock, buying AMD stock could be the ultimate hedge. But this stock could also be a great long-term buy for investors entering the AI ​​chip space for the first time.