Can AMD Replicate NVIDIA's Glory?
After a three-month hiatus, $Advanced Micro Devices(AMD)$ is back on the rise, outpacing $NVIDIA Corp(NVDA)$ 's 8.5% gain with a whopping 16.6% surge in the last six trading days.
$Intel(INTC)$ , another chip giant, has also been soaring, shaking off its earlier doldrums.
AMD, Intel and NVIDIA are the three major GPU giants, but NVIDIA has soared since the AI era dawned, leaving AMD's gains looking modest despite nearing all-time highs.
Lagging behind in the competition!
So far this year, AMD rose only 24.8%, while Nvidia was as high as 172%, a huge contrast, as an AI backward stock, AMD has no chance to copy the glory of Nvidia?
The answer is yes, but the surge won't match NVIDIA's.
First of all, NVIDIA's focus on GPUs gives it an edge. AMD's forte is CPUs, and its GPU tech lags behind NVIDIA.This gap means AMD struggles to compete in the AI GPU space. Its AI GPU MI300 sales are expected to be only $4 billion in the year, far lower than Nvidia's nearly $100 billion revenue scale.
Although AMD is lagging behind in the competition, it is also playing catch-up, and technology giants are wary of relying on Nvidia, as long as AMD does not pull the arm, AI GPU income can also rise, it just takes time.
Right now, AMD's growth potential falls short of NVIDIA's. Analysts expect just a 6.8% YoY revenue boost in Q2, at $5.73 billion, compared to NVIDIA's impressive gains.
The fundamentals are improving!
Data centers are now AMD's top revenue driver, with Q1 setting records. With MI 300 shipments, revenue could soar further!
The client segment (PCs) is AMD's second-largest source. Global PC shipments are expected to hit 64.9 million in Q2, up 3%, according to IDC:
The PC industry is undergoing a massive AI-fueled transformation in decades. NVIDIA's CEO predicts AI PCs will revolutionize the market, worth trillions in the next decade.
At COMPUTEX 2024, Intel's CEO saw AI PCs transforming computing experiences, with nearly 60% of new PCs having AI by 2027.
$Lenovo Group Ltd.(LNVGY)$ 's CEO anticipates 10% AI PC market penetration this year, rising to 50-60% by 2026, boosting average selling prices.
$Hewlett Packard Enterprise(HPE)$ expects AI-powered PCs to account for 10% of shipments in the second half of this fiscal year, reaching 40-50% in three years.
AMD's client segment looks promising, and PC sales can boost its gaming business too.
Embedded solutions, mainly for industrial use, underperformed in Q1, down 45.8% due to the global economic slowdown. Stability would be a relief in the second half.
Since embedded isn't AMD's core, its struggles won't hinder the big picture. With PC and AI GPU shipments rising, AMD's revenue could climb quarter-over-quarter. Analysts forecast a 14% revenue boost in Q3, a six-quarter high.
Still have room to rise
AMD trades at a lofty 13x price-to-sales ratio, but with expected revenue growth, earnings growth looks achievable.
Therefore, AMD has room to run, but how much depends on faster revenue growth or AI GPU breakthroughs.
AMD's future hinges on its data center business – the PC segment's resurgence is just a bonus!
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