Advanced Micro Devices (AMD) has now showcased its new artificial intelligence chip — but it’s unlikely to dethrone fellow Club-holding Nvidia (NVDA) as the dominant semiconductor firm in the burgeoning field of artificial intelligence. Tuesday’s reaction on Wall Street suggests we’re not alone in that view. AMD shares fell 3.6% to $124.53 each, while Nvidia climbed nearly 4% to $410.22 per share. Earlier in Tuesday’s session, AMD shares were positive and briefly touched a fresh 52-week intraday high of $132.83 apiece. Investors had high hopes going into AMD’s presentation on its latest data-center and AI technology — pushing its stock price up around 58% since May 3, the day after AMD issued disappointing second quarter-revenue guidance . Our belief that investor expectations had grown too high — motivating some profit-taking in AMD two weeks ago — was confirmed Tuesday. Simply put, an AI-driven boost to AMD’s revenue and earnings is a bit further out on the horizon than its recently-soaring stock suggested. “My biggest takeaway, frankly, is that [AMD is] very early on this journey,” Bernstein semiconductor analyst Stacy Rasgon said Tuesday on CNBC. Rasgon has the equivalent of a hold rating on AMD. “They’ve got a ways to go,” he said. To be sure, there isn’t necessarily a problem with AMD’s new AI chip — the MI300X graphics processor —nor its accompanying computing software, known as ROCm, which is of great interest to developers. The issue is mainly that Nvidia commands such a huge lead in the market for graphics processing units (GPUs), which have been used to train the models powering generative AI applications like ChatGPT. Nvidia also possesses an unmatched software suite that allows customers to maximize their use of the chips. Investor optimism on Nvidia’s AI prowess has propelled its stock up more than 180% year-to-date, and put its market value north of $1 trillion, as of Tuesday’s close. NVDA AMD YTD mountain Nvidia’s stock performance versus Advanced Micro Device’s so far in 2023. In a CNBC interview Tuesday, AMD CEO Lisa Su argued that AI isn’t a winner-take-all situation for chipmakers. “It’s a market where you’re going to have multiple winners, and that it’s going to play out over the next few years,” Su said. AMD on Tuesday said it expects the market for AI chips for the data center to grow to $150 billion in 2027, from $30 billion in 2023. Whatever the size the AI chip market ends up being, AMD should be able to capture some of it. But for now, our small position in the company remains predicated, in large part, on its ability to continue seizing market share from longtime rival Intel (INTC) in the more traditional central processing unit (CPU) business. AMD had assuring things to say on that front Tuesday, including that its Bergamo CPU was shipping at a high volume to large cloud-computing providers known as hyperscalers. Nvidia, on the other hand, is the chip designer best-positioned in the AI arms race, justifying its position as an “own-it, don’t-trade-it” stock, according to Jim Cramer. (Jim Cramer’s Charitable Trust is long AMD and NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Lisa Su delivers a keynote address at CES 2023 at The Venetian Las Vegas on January 04, 2023 in Las Vegas, Nevada.
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Advanced Micro Devices (AMD) has now showcased its new artificial intelligence chip — but it’s unlikely to dethrone fellow Club-holding Nvidia (NVDA) as the dominant semiconductor firm in the burgeoning field of artificial intelligence.