Developing artificial intelligence (AI) software wouldn’t be possible without data centers and the powerful graphics processing chips (GPUs) within them. Over the past 18 months Nvidia (NASDAQ: NVDA) has dominated the GPU industry with a staggering 98% market share.
But competition had to arise, and Advanced micro devices (NASDAQ: AMD) has come up with an exciting GPU roadmap. The company hosted its ‘Advancing AI’ event on October 10, where CEO Lisa Su provided an update on its next-generation chips.
Although Advanced Micro Devices still trails Nvidia in the AI GPU market, Su’s comments suggest the company is catching up quickly. Here’s why investors should be excited.
Advanced Micro Devices was over a year behind Nvidia in the AI GPU race
Nvidia’s H100 GPU set the benchmark for AI training and AI inference. The chip went into full production in September 2022, although sales did not increase until 2023, as AI fever gripped the technology sector. The H100 is still a popular product today, and Nvidia continues to struggle with supply constraints because demand is so high from leading AI companies like OpenAI. Amazon, Microsoftand more.
These supply challenges have opened the door for competitors like Advanced Micro Devices to steal some market share. The company announced its own data center GPU in late 2023, called the MI300X, which was specifically designed to compete with the H100. So far, it has attracted some of Nvidia’s top customers, including Microsoft, OracleAnd Metaplatforms.
In fact, Advanced Micro Devices says some of these customers are seeing performance and cost benefits from using the MI300X compared to the H100. Despite being more than a year behind in launch date, the challenger delivered a very valuable product. It predicts that the MI300 series will push GPU revenues to a record $4.5 billion by 2024 – an estimate that has already been increased twice.
But Nvidia still has an edge. The company started shipping its new H200 GPU earlier this year, which is capable of running AI inference at nearly twice the speed of the H100. It meant that Advanced Micro Devices was still one step behind. However, at the Advancing AI event, Lisa Su offered new details about her company’s new MI325X, which will deliver 80% more high-bandwidth memory than the H200 and 30% better inference performance.
That’s great news, but the release is not expected to take place until the first quarter of 2025.
The race to catch up doesn’t stop there. Nvidia is now focusing on the latest Blackwell chip architecture, which paves the way for the biggest leap in performance yet. The new GB200 NVL72 system can perform AI inference at as much as 30x the speed of the equivalent H100 system. Each individual GPU will be priced similarly to the H100 (when it first launched), so Blackwell is going to deliver an incredible improvement in cost efficiency.
In other words, even though Advanced Micro Device’s MI325X is a superior product to the H200, it will lag significantly behind Nvidia’s latest hardware.
Advanced Micro Device’s Blackwell competitor is just around the corner
This is where things get exciting. Lisa Su told the audience at Advancing AI that the company is preparing to ship another new GPU next year called the MI350X. It is based on the new CDNA (compute DNA) 4 architecture, which offers a staggering 35x performance jump, compared to CDNA 3 chips like the original MI300X.
Advanced Micro Devices has explicitly said that the MI350X will compete directly with Nvidia’s Blackwell chips.
Nvidia plans to ramp up shipments of Blackwell GPUs during the fourth quarter of fiscal 2025 (which runs from November to January), while Su said Advanced Micro Devices will start shipping the MI350X in the second half of calendar 2025. That means Nvidia has fallen behind After more than a year with the MI300X, Advanced Micro Devices has the opportunity to cut Nvidia’s lead to just a few months with the MI350X.
Advanced Micro Devices will announce its latest financial results in a few weeks
The company could provide further updates on its new chips when it announces its financial results for the third quarter of 2024 (ending September 30), which is expected to happen on or around October 29.
During the second quarter, Advanced Micro Devices generated a record $2.8 billion in data center revenue, up 114% from the same period a year ago. Another strong showing could prompt management to raise its full-year GPU sales forecast above $4.5 billion. Given the company’s track record in that regard, there’s a good chance this will happen.
Advanced Micro Devices stock is currently trading at a very expensive price-to-earnings (P/E) ratio of 200.3, having generated modest earnings per share (EPS) of $0.82 over the last four quarters. For perspective, the Nasdaq-100 technology index is currently trading at a price/earnings of 32.1.
However, Wall Street analysts estimate that the company could post earnings per share of $5.43 in 2025, putting the stock at a more reasonable price-to-earnings of 30.6:
That means Advanced Micro Devices stock could be a great buy right now for investors willing to hold the stock for at least a few years, especially with the MI325X and MI350X coming to market in 2025.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Lisa Su just delivered incredible news for high-end micro device investors, originally published by The Motley Fool
