AMD Poised for Growth as AI Chip Demand Soars

Advanced Micro Devices (AMD) is expected to benefit from the growing demand for AI chips, driven by the strong upcycle in the semiconductor market, with its data center GPUs and CPUs poised to capture a significant portion of the rapidly growing $25 billion market by 2025. The company faces stiff competition from rivals like Nvidia, Intel, and Qualcomm, but its strong position and growth potential make it an attractive prospect for investors." This description focuses on the primary topic of AMD's growth prospects in the AI chip market, the main entities involved (AMD, Nvidia, Intel, Qualcomm), and the context of the rapidly growing semiconductor market. It also highlights the significant actions and implications of AMD's position in the market, including its potential to capture a significant market share and its attractiveness to investors.

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AMD Poised for Growth as AI Chip Demand Soars

AMD Poised for Growth as AI Chip Demand Soars

Advanced Micro Devices (AMD) is expected to benefit from a strong upcycle in the semiconductor market and soaring demand for AI chips, according to Jefferies analyst Blayne Curtis. Curtis assumes coverage of AMD with a buy rating and a price target of $190, representing a 25% upside from the current stock price of $151.92 as of May 10, 2024.

Why this matters: The growth of the AI chip market has significant implications for the technology industry as a whole, as it could lead to increased adoption of AI-powered devices and services. As companies like AMD and its competitors vie for market share, the development of AI technology is likely to accelerate, with potential consequences for industries beyond tech.

Several key factors are driving AMD's growth prospects. The company's latest MI300 family of data center GPUs has already surpassed $1 billion in revenue and is expected to bring in $4 billion this year. AMD is also well-positioned in the growing data center CPU market with its EPYC family of processors. Additionally, the PC market presents an opportunity, as some of AMD's PC CPUs have built-in AI accelerators that can boost the performance of AI tasks performed directly on users' devices.

Despite the optimistic outlook, AMD faces stiff competition in the AI chip market. Rival Nvidia has benefited the most from the surge in demand so far, but AMD is starting to catch up. Intel is also a strong competitor in the data center CPU space and is integrating AI hardware into all of its upcoming Meteor Lake laptop chips. Qualcomm is expected to enter the market this year as well.

AMD's stock has experienced some volatility recently, falling for 4 consecutive days. There is a 90% probability the stock could decline 18.66% over the next 3 months to a price range of $113.54 to $147.41. However, a buy signal was issued from a pivot bottom point on May 1, and the stock has risen 5.30% since then. The 3-month Moving Average Convergence Divergence (MACD) also indicates a buy signal.

The data center AI chip market is expected to be worth $10 billion in 2023 and surge to $25 billion by 2025, according to research firm 650 Group. The broader custom chip market was estimated at approximately $30 billion in 2023. With its expertise in GPUs and CPUs, AMD is poised to capture a significant portion of this rapidly growing market. The company's strong position and growth potential make it an attractive prospect for investors, even as it navigates a competitive landscape.

Key Takeaways

  • Jefferies analyst sets $190 price target for AMD, a 25% upside from current price.
  • American Micro Devices (AMD) to benefit from strong semiconductor market and AI chip demand.
  • AMD's MI300 GPUs and EPYC processors drive growth, with $4 billion revenue expected this year.
  • AMD faces stiff competition from Nvidia, Intel, and Qualcomm in the AI chip market.
  • Data center AI chip market to reach $25 billion by 2025, with AMD poised to capture a significant share.