$Advanced Micro Devices(AMD)$ disappointed Wall Street last quarter with its projection for more than $3.5 billion in 2024 revenue from AI graphics-processing units, as expectations had become elevated in the $6 billion range.
And part of the stock's recent weakness - down 16% in the past month - has to do with a more recent assessment of the landscape for graphics-processing units that serve AI-use cases, in the wake of Nvidia's announcement of its new Blackwell chip lineup. Nvidia's management suggested plans to price the hardware in a way that makes it relatively accessible and helps grow adoption, which was seen as a potentially negative sign for AMD, which has its own AI hardware but trails the market leader.
Read: Nvidia's stock has had a killer run. Why it's still Morgan Stanley's top AI-chip pick.
In Lee's view "it is unlikely for Nvidia to have 100% of the market share in AI GPUs," and his base case assumes AMD will have 10% of the market in 2025. That would translate to $12.3 billion in AI GPU revenue potentially, he noted, while the consensus view is around $9 billion.
In a bull-case scenario, AMD could capture 15% of the market in 2025, which would imply revenue potential of $18.5 billion for that part of the business.
Lee noted that AMD's MI300 product looks to be more of a competitor to older Nvidia hardware rather than the new Blackwell lineup.
"Despite market concerns of Nvidia's dominance via its GB200 platform in [2025], we believe the MI300 is not direct competition to the GB200," he wrote, referring to Nvidia's Grace Blackwell processor. "We expect the introduction of the higher ASP MI350/M375/MI40 to be a real direct competitive product to Nvidia's GB200."
AMD gogogo. Fly to the moon tonight !
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