AMD’s Looking Like A Chip On The Old Block

AMD’s Looking Like A Chip On The Old Block
Paul Allison, CFA

6 months ago2 mins

What’s going on here?

AMD unveiled a chiseled-up gang of chips that could have the potential to rival Nvidia’s street cred.

What does this mean?

Artificial intelligence (AI) might be about to rob millions of their jobs, but chipmakers can count on their mortgages being paid for a while still. See, the super-smart tech uses tons of computing power, so even if robots do shoot for world domination, they’ll need plenty of top-grade chips to pull it off. Nvidia stepped up to the plate already, delivering superchips capable of running complex AI applications. But AMD’s latest launch could heat up the competition, bringing a new range of souped-up chips – most crucially, the AI-focused MI300X – into the fold. Tech-crazed investors are clearly excited: they’ve sent AMD’s stock up nearly 100% this year.

AMD stock
Source: Google Finance

Why should I care?

Zooming in: Nvidia’s like Tesla, but for chips.

AMD’s big move may be too little, too late though. Nvidia’s cemented itself as the go-to AI chipmaker, and any rival offerings will be compared to the firm’s ultra-smart standard. What’s more, AMD’s new chips won’t be available to sample until the third quarter of this year, with production ramping up around then too. So before AMD gets round to printing shipping labels, Nvidia could be pumping out even sharper editions of its already famous chips. Basically, AMD’s competing in a marathon led by an Ironman champion.

Data center revenue
2023-24 are projections | Source: The Wall Street Journal, FactSet

The bigger picture: Less is more.

Here’s a brain teaser for your commute: while investors were piling into AMD shares, the firm’s revenue was shrinking and its books were covered in red ink. So – spoiler alert – here’s what gives: the semiconductor industry moves practically hand-in-hand with economic cycles, so companies’ profit is on a permanent rollercoaster. That means even during the big dips, investors know a turnaround’s coming – and they’re only too happy to buy in when the chips are down.



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