AMD still has a gap to close with Nvidia's AI chips

• AMD reported Tuesday that its gross roseate 18% from nan aforesaid clip past year.
• AMD intends to adjacent nan spread pinch Nvidia, which holds 80% of nan GPU market.
• Despite growth, AMD's banal fell arsenic overmuch arsenic 10% post-earnings, reflecting investor concerns.

During Advanced Micro Devices' 3rd 4th net telephone connected Tuesday, CEO Lisa Su said that nan institution has "closed a bully portion of nan gap" pinch its AI rival, Nvidia.

AMD still has a ample spread pinch Nvidia, arsenic it lags behind successful GPUs aliases graphics processing units. These units are heavy utilized successful training AI owed to their expertise to process ample datasets. Nvidia holds much than 80% of nan market.

AMD reported gross expanding 18% twelvemonth complete twelvemonth successful its third quarter, primarily owed to data halfway income and an summation successful Instinct GPU and EPYC CPU sales.

At nan aforesaid time, analysts raised concerns astir nan hold successful AMD's GPU offerings. Earlier this month, AMD announced that its caller procreation MI325X accelerator spot will statesman accumulation shipments later this twelvemonth and much wide expertise successful early 2025. It besides plans to release MI350 adjacent twelvemonth to compete pinch Nvidia's highly anticipated Blackwell chip, which is expected to commencement shipping earlier than AMD successful nan 4th fourth of 2024.

Although AMD's net performed astir nan levels predicted by Wall Street analysts, banal prices dipped as overmuch arsenic 10% Wednesday, reflecting investors' disappointment.

Vivek Arya, a Bank of America Securities analyst, asked connected nan net telephone astir really its chips are "kind of 1 twelvemonth down nan manufacture leader."

"Can you really summation stock until that spread is closed?" he asked.

Su responded that AMD's roadworthy representation "actually closed a bully portion of that gap" pinch Nvidia's products and that AMD holds an advantage successful information halfway retrofitting.

"I deliberation MI325 is simply a awesome product. It's going to compete very good pinch H200, and nan MI350 bid will compete very good pinch Blackwell," Su said connected nan call.

When asked by Piper Sandler semiconductor expert Harsh Kumar astir what is hindering AMD from becoming a bigger GPU marketplace subordinate compared to Nvidia, Su said that acquiring nan full addressable marketplace takes time. Developing chips pinch much processing capacity tin besides return years of creation and testing.

"We've had an highly bully merchandise moreover backmost successful nan ROM days," Su said. "But it does return clip to guarantee that spot is built, location is familiarity pinch nan product."

Analysts said that while AMD sewage a later commencement successful GPUs than Nvidia, it is still slow chipping distant astatine its crushed successful nan AI boom.

"As overmuch arsenic we still judge NVDA will beryllium difficult to shingle from its 80-85% AI share, AMD still has done an enviable occupation from virtually zero to ~5% marketplace share," Arya wrote successful a statement released connected Wednesday.

Even if this stock remains unchanged, nan underlying AI maturation will still supply AMD "the chance to participate," he added.

Morgan Stanley besides bumped up its estimates of AMD's maturation for nan adjacent twelvemonth to $8 billion, though its analysts raised concerns astir customer usage. AMD's customers see Microsoft, Meta, and Google.

"Our checks proceed to show respective customers that are committed to utilizing AMD architecture, but existent usage still seems comparatively small," Stanley's equity analysts wrote.