Lisa Su displays an AMD Instinct MI300 chip as she delivers a keynote address at CES 2023 in Las Vegas, Nevada, Jan. 4, 2023.
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AMD shares rose 9.9% on Thursday to close at $128.37, marking the stock’s best day since May and the highest close since June. The surge comes a day after it launched new AI chips that will compete against Nvidia to power artificial intelligence applications.
On Wednesday, AMD CEO Lisa Su discussed the previously-announced Instinct MI300X, a large graphics processor designed for AI-oriented servers, and said that Microsoft and Meta had committed to using the chip.
Nvidia has dominated the AI chip market for the past year, but cloud providers and technology companies have been searching for an alternative to save costs and provide flexibility.
Thursday’s rise in AMD shares suggests investors believe the chipmaker can take a chunk of the AI chip market from Nvidia, although the company projects only $2 billion in AI GPU sales in 2024 — lower than market expectations for Nvidia AI revenue. Wall Street expects Nvidia to post over $16 billion in data center sales in the current quarter alone, although that metric includes other chips besides AI GPUs.
AMD’s new high-end chip starts shipping in significant quantities next year.
“We believe that today’s event highlighted how AMD remains extremely well positioned to take advantage of the rapidly expanding AI TAM, as they continue to stack up customer partnerships and roll out products with impressive (and extremely competitive) performance metrics,” Deutsche Bank analyst Ross Seymore wrote in a note on Thursday.
Citi analysts estimated in a note on Thursday that AMD could end up with about 10% of the total AI chip market.
Su said at the launch event Wednesday that the company believes the total market for AI chips could climb to $400 billion over the next four years, twice as high as the company previously believed. Su suggested to reporters that AMD doesn’t need to beat Nvidia to do well in the market for AI chips, because it will be so large.
“I think it’s clear to say that Nvidia has to be the vast majority of that right now,” Su told reporters on Wednesday, referring to the AI chip market. “We believe it could be $400 billion-plus in 2027. And we could get a nice piece of that.”
