Nvidia is the largest supplier of data center GPUs and its stock is up 173% through 2024 on strong revenue growth. However, competition is increasing, and Advanced micro devices (NASDAQ: AMD) launched its own GPUs, which have attracted some of Nvidia’s largest customers to date.
Nvidia’s flagship H100 data center GPU went into production in September 2022 and helped the company capture an estimated 98% market share in 2023 as there was virtually no competition. That was until AMD launched the MI300X GPU in December, and despite being more than a year behind, its 2024 launch was promising.
AMD will start shipping its new MI325X to customers this quarter, which delivers up to 20% better AI inference performance than Nvidia’s H200 (which replaced the H100 earlier this year). Because AI developers often rent computing capacity by the minute from data center operators, any speed improvement can lead to significant cost savings.
However, investors are already looking forward to AMD’s MI350 series, which is expected to reach customers in the second half of 2025. This is based on a new architecture called CDNA (Compute DNA) 4, which will deliver a 35x performance increase compared to CDNA-3 based GPUs such as the MI300X. The MI350 is AMD’s answer to Nvidia’s latest Blackwell-based GPUs, which are the source of “insane” demand (according to Jensen Huang) and have just hit the market.
But AI is quickly migrating from the data center 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 the device, reducing reliance on external data centers and creating a much faster user experience.
Millions of Ryzen AI-powered PCs have already shipped from leading manufacturers such as Lenovo, Microsoft and PK. Lenovo and HP plan to triple the number of Ryzen AI devices they offer by the end of 2024, and AMD expects there will be more than 100 commercial platforms using its AI chips by 2025 as companies look to upgrade to the latest technology.
AMD just reported its financial results for the third quarter of 2024 (ending September 28) and the company achieved a record total revenue of $6.8 billion, which was an increase of 18% from the year-ago period. However, thanks to AI, there were even stronger results beneath the surface of that headline figure.
AMD’s data center revenue rose 122% year over year to $3.5 billion, which was also a record, led by strong GPU sales. In 2024, AMD CEO Lisa Su told investors that the company could generate $2 billion in data center GPU revenue throughout the year, but that number will now exceed $5 billion.
AMD’s customer segment – ​​home to the Ryzen AI chip range – grew revenue 29% to $1.9 billion. Lisa Su believes that the AI ​​PC cycle is still at a very early stage, so investors can expect strong growth in this segment in the future.
On the other hand, AMD delivered very weak results in its gaming segment. Sales fell 69% as demand for consoles like this declined Sony‘s PlayStation 5 and Microsoft’s Xbox, and also as desktop PC gamers await AMD’s next-generation GPUs, which are set to arrive in 2025.
AMD has delivered $3.00 in non-GAAP (adjusted) earnings per share over the last four quarters. Based on the share price of $148.60 at the time of writing, it trades at a price-to-earnings (P/E) ratio of 49.5. That makes it slightly cheaper than Nvidia stock, which trades at a price-to-earnings ratio of 63.1.
Furthermore, Wall Street analysts (according to Yahoo) estimate that AMD will generate $5.20 in earnings per share in 2025, bringing its forward price-to-earnings ratio to just 28.6. Since the stock market is a forward-looking machine, that could be why analysts have reached such a bullish consensus on AMD.
Of the 56 analysts followed by The Wall Street Journal39 have given AMD stock the highest possible Buy rating. Eight others are in the overweight (bullish) camp, while nine recommend holding.
At the top, I mentioned Jensen Huang’s prediction that data center operators will spend a trillion dollars on AI infrastructure over the next five years. Well, AMD believes the market for its chips alone will be worth $500 billion by 2028, which means growing as much as 60% per year between now and then.
Nvidia may be the frontrunner in capturing the bulk of that value, but given AMD’s recent growth in GPU sales in data centers and its innovation pipeline – including the upcoming MI350 – this company could pose a serious threat in the coming years.
Nvidia’s market share will inevitably decline over time as competition increases, so for investors who already own these stocks, buying AMD stock could be the ultimate hedge. But this stock could also be a fantastic long-term buy for investors diving into the AI ​​chip space for the first time.
If our analyst team has a stock tip, it could be worth listening to. After all, Stock Advisors the total average return is 816% – a market-shattering outperformance compared to 167% for the S&P 500.*
They just revealed what they think are the 10 best stocks for investors to buy now… and Advanced micro devices made the list, but there are nine other stocks you might be overlooking.
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*Stock Advisor returns October 28, 2024
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, HP, 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.
Nvidia shares are up 173% in 2024, but here’s another Super Semiconductor stock to buy by hand, according to Wall Street originally published by The Motley Fool
