AMD still has a gap to close with Nvidia's AI chips
NEWS | 19 November 2024
AMD said on Tuesday that its revenue in the third quarter rose by 18% from the same time last year. AMD aims to close the gap with Nvidia, which controls more than 80% of the GPU market. Despite its growth, AMD's stock fell by as much as 10% post-earnings, reflecting investor concerns. During Advanced Micro Devices' third-quarter earnings call on Tuesday, CEO Lisa Su said the company had "closed a good part of" the gap with Nvidia, its AI rival. But AMD still lags behind Nvidia in the market for GPUs, or graphics processing units, which are heavily used in training AI models because they can process large datasets. Nvidia controls more than 80% of the market. AMD said revenue increased by 18% year over year, primarily because of gains in its data-center segment, including sales of its Instinct GPU and its EPYC CPU. At the same time, analysts raised concerns about a delay in AMD's GPU offerings. This month, AMD said its new-generation MI325X accelerator chip would begin production this year and become widely available in early 2025. It also plans to release its MI350 chip next year to compete with Nvidia's highly anticipated Blackwell chip, which is expected to start shipping in the fourth quarter. Though AMD's performance was about what Wall Street analysts had expected, its stock price dipped by as much as 10% on Wednesday. On the earnings call, Vivek Arya, a Bank of America Securities analyst, described AMD's chips as "kind of one year behind the industry leader." "Can you really gain share until that gap is closed?" he asked. Su responded that AMD's road map had "actually closed a good part of that gap" with Nvidia's products and that AMD held an advantage in data-center retrofitting. "I think MI325 is a great product," Su said. "It's going to compete very well with H200, and the MI350 series will compete very well with Blackwell." When Harsh Kumar, a Piper Sandler semiconductor analyst, asked what was hindering AMD from becoming a bigger player in the GPU market, Su said that acquiring the total addressable market takes time. It can also take years to design and test chips with more processing capacity. "We had an extremely good product even back in the ROM days," Su said. "But it does take time to ensure that there is trust built, there is familiarity with the product." Analysts said that while AMD got a later start in GPUs than Nvidia, it's slowly chipping away at Nvidia's lead in the AI boom. "As much as we still believe NVDA will be hard to shake from its 80-85% AI share, AMD still has done an enviable job from virtually zero to ~5% market share," Arya wrote in a note released on Wednesday. Even if this share remains unchanged, he added, the underlying AI growth will give AMD "the chance to participate." Morgan Stanley also bumped up its estimates of AMD's growth for the next year to $8 billion, though its analysts raised concerns about customer usage. AMD's customers include Microsoft, Meta, and Google. "Our checks continue to show several customers that are committed to using AMD architecture, but actual usage still seems relatively small," Morgan Stanley's equity analysts said.
Author: Helen Li.
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