Summary
- Advanced Micro Devices, Inc. shares may be ready for another leg up.
- The chipmaker is making several smart moves to drive up adoption in generative AI workloads in the near future.
- AMD stock is likely to be re-rated higher and inevitably head higher in the months to come.
This article discusses Advanced Micro Devices, Inc. (AMD) and its prospects in the generative artificial intelligence (AI) market. Here are the key points from the article:
Understanding the Problem:
- AMD’s stock has faced a decline of nearly 30% since its highs in June, partly due to concerns about its competitiveness in AI workloads compared to Nvidia.
- The core issue is that AMD’s data center revenue growth has been slower than Nvidia’s, indicating that it might not be as competitive in the AI and data center space.
- The problem is attributed to limited software and driver support for AMD GPUs, making it more challenging to run AI workloads on AMD hardware compared to Nvidia.
The Solution Is Underway:
- While AMD’s hardware is competitive, its software ecosystem, ROCm, lacks support for many of its GPU SKUs.
- AMD is working on software updates and plans to add official support for its consumer and workstation GPUs by this Fall. This will simplify setup and make AMD GPUs more attractive for AI applications.
- AMD’s GPUs are selling at a discount compared to Nvidia, and improved software support could lead to increased adoption.
- AMD has also seen growth in data center revenue with the release of accelerators like Mi100, Mi200, and Mi250. The upcoming Mi300 accelerator is expected to further boost data center revenue.
Generative AI Growth Opportunity:
- Generative AI is expected to become a $1.3 trillion market by 2023, and AMD aims to tap into this growth.
- Even if AMD captures a modest 10% share of this market, it could result in significant revenue growth, nearly 5.6 times its FY22 revenue.
- The success of AMD in gaining market share in the generative AI space depends on factors like software upgrades, hardware competitiveness, and the competitive landscape.
- AMD’s actual market share gains in the data center segment should be monitored to assess operational performance.
- Transparency in customer engagement and revenue generation in the data center GPU and accelerator market is limited, making it difficult to gauge the actual adoption.
- AMD’s shares are trading at a relatively low P/S multiple compared to recent years and Nvidia’s valuation.
- If AMD successfully taps into the generative AI market, its revenue is likely to grow, potentially leading to a higher valuation by the market.
- The article suggests that AMD could be a multi-bagger stock at its current levels and that investors with a long-term horizon may consider accumulating AMD shares.
Please note that investment decisions should be made based on thorough research and consideration of individual financial goals and risk tolerance.
To read full story, click?below
