AMD Stock: Why The Chipmaker Is a Better Investment Than Nvidia

Advanced Micro Devices (NASDAQ:AMD) stock is just getting started benefitting from the artificial intelligence game with its recently launched MI300X chip.

Although it positions the chipmaker as a strong competitor to Nvidia’s (NASDAQ:NVDA) offerings because it has been designed to handle the heavy computing workloads AI systems demand, there are risks.

Nvidia, for example, just unveiled its newest, most powerful chip: Blackwell. Priced between $30,000 and $40,000 each (NVDA won’t sell just the chip, however, so it’s likely to be more expensive), it is a serious threat in the AI accelerator race.

Still, valuation is not one of AMD stock’s issues. NVDA stock is up 80% in 2024 and already tripled in value for the past year. AMD hasn’t exactly been a slouch, but across many metrics, its shares offer the better value.

And because AMD arguably has just as good growth prospects as its rival, the chipmaker may be the better buy. Let’s take a closer look at just how Advanced Micro Devices could make that happen.

Competitive on Power and Price

AMD’s MI300X chip is touted as “the most advanced AI accelerator.” It was designed to handle the heavy computing workloads AI systems demand.

AMD’s CEO Lisa Su predicts the market for AI accelerator chips like the MI300X will continue to grow significantly, reaching over $400 billion by 2027. 

She bases this prediction on the potential for AI to completely transform business and improve personal productivity.

She’s not alone. Investing guru Cathie Wood foresees AI delivering $200 trillion in worldwide productivity gains by 2030 as adoption goes global. AMD projects it will generate more than $2 billion in sales from the new chips in 2024.

Investors are also optimistic about the chipmaker’s prospects in AI. AMD stock should benefit from this growth.

Despite Nvidia being the industry’s dominant player and launching a powerful new chip, AMD’s advancements in AI technology position it well for future success.

The MI300X is cheaper and more powerful than its rival’s H100 chip. That could land it more customers. Clients might not want to step up to the Blackwell chip either.

In summary, AMD’s new AI chip is generating excitement in the industry, and its potential impact on the market is significant.

Investors should keep an eye on such performance benchmarks as the chip gains traction.

An Impressive Customer List

Still, AMD’s bread and butter is its more mundane chips for hyperscalers in the cloud business. Its Genoa chip, for example, is part of the fourth generation of EPYC server processors that made significant strides in the server and cloud markets. 

Microsoft (NASDAQ:MSFT) Azure and Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google Cloud both incorporated EPYC processors into their servers.

Microsoft’s Azure HPC stable now features virtual machines equipped with EPYC processors that leverage AMD’s virtual caching technology.

Admittedly, Azure also includes high-speed InfiniBand connectivity from Nvidia. It became one of the first organizations to adopt the Blackwell chip for generative AI technologies.

Still, Oracle (NYSE:ORCL) Cloud Infrastructure (OCI) is also using AMD’s fourth-gen EPYC processor-based E5 compute instances.

By integrating EPYC into their infrastructure, they are expressing significant confidence in AMD’s ability to deliver. Indeed, Microsoft was so impressed with AMD it adopted the MI300X chip to handle the ChatGPT-infused cloud services. Microsoft is covering all of its bases when it comes to AI.

Yet Dell (NYSE:DELL) is deploying EPYC processors in its next-gen PowerEdge servers. Super Micro Computer (NASDAQ:SMCI) utilizes them as well.

In short, AMD’s EPYC processor continues to impress and make waves in the server and cloud markets. It is challenging Intel’s (NASDAQ:INTC) dominance in the space by offering competitive performance and features.

More Speed Bumps

Yet, one of the risks AMD faces is restrictions on its sale of chips to China. To sell them into the country, Bloomberg News reported earlier this month AMD needed to apply for a special license because it’s chips were so advanced.

As the Biden administration clamps down on selling advanced technology and equipment to China, AMD might not be able to reach customers there.

China accounted for 10% of total revenue for AMD in 2023, or nearly double the total of the year before.

AMD could still navigate this regulatory labyrinth. If successful in securing a license, coupled with the growth the chipmaker enjoys here at home and in Europe, AMD stock makes for a tough stock to beat.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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