Semiconductor designer Advanced Microdevices (NASDAQ:AMD) He’s been fainting lately. Despite a sharp price jump last Monday, AMD stock is down more than 40% from its one-year high. With less than a week left in 2024, stock prices have plummeted 15% this year. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) The stock index has gained 25% so far this year.
Is AMD missing out on the booming artificial intelligence (AI) market, or is the stock a fantastic AI investment at these lower prices? Upon closer review, a third option seems more correct: AMD is a “hold” in my opinion.
archrival NVIDIA (NASDAQ: NVDA) is setting the standard for AI accelerator chips and how they are used in real computer systems, but AMD is one of the main rivals to that company’s dominant position.
In October’s third-quarter report, AMD’s data center sales increased 122% year over year to $3.5 billion. The Instinct series of AI accelerators and the EPYC line of server-grade processors drove this increase, and both products play important roles in training and operating large language models (LLMs).
Of course, AMD’s data center sales can’t compare to Nvidia’s $30.8 billion in the same quarter. However, that is not the end of the world.
AMD is embracing its underdog role. The company is not trying to set new AI standards. Instead, it makes sure its products run on the same AI software and programming techniques as Nvidia chips. Simplifying the switch from one hardware solution to another makes it easier to convince existing Nvidia users to opt for AMD alternatives.
“Pretty much any model written for the standard framework, if you’re running NVIDIA, you can run it on [AMD Instinct] MI300 out of the box, day 1, and it would work,” AMD’s Forrest Norrod said at a recent industry conference.
And this strategy is paying dividends. AMD’s data center growth surpassed Nvidia’s 112% year-over-year increase in the third quarter. In other words, AMD is gaining some ground against the biggest AI chip specialist.
AMD is a major AI hardware provider. But it’s not all wine and roses. The AI boom may have gone too far too fast, and investors are taking a more critical look at this boom from a long-term perspective.
As a result, many stocks in the AI space have stalled or even fallen recently. Nvidia shares are up a measly 0.1% in the past month and partner OpenAI microsoft it gained only 0.6% in the same period. Leading AI System Builders super microcomputer and Dell they fell 7.1% and 17.2%, respectively.