AMD may not be at the top of every investor’s AI list, but the chipmaker’s MI300X will provide strong competition for Nvidia’s H100. Open AI, Meta and Microsoft are some of the early adopters.
AMD [AMD] is the sixth-largest chipmaker in the world by market cap.
For a long time, AMD’s business has been focused on making chips for PCs, servers and gaming consoles. However, thanks to the AI boom, its data centre segment has quickly become its biggest money-earner.
Given the AI gold rush, it’s unsurprising that seven ‘super investors’ splurged $1.1bn on AMD shares in Q4 2023, while four sold a combined $67.4m, according to Stockcircle.
Citadel Founder, CEO and Co-chief Investment Officer Ken Griffin snapped up approximately 3.5 million AMD shares, increasing his holding in the chipmaker by 140.3%, while Andreas Halvorsen, Co-founder and CEO of Viking Global Investors, started a new position in the stock, with a purchase of approximately 4.7 million shares.
Meanwhile, Ken Fisher, Founder and Executive Chairman of Fisher Investments, increased his stake by 2.1%, adding approximately 570,000 shares; Cathie Wood, Founder, CEO and Chief Investment Officer (CIO) of ARK Invest, increased her position by 16.7%, buying approximately 44,500 AMD shares.
Sellers included Paul Tudor Jones, Founder, Co-Chairman and CIO of Tudor Investments, who cut his stake by 84.7%, offloading approximately 183,000 shares, and David Tepper, Founder of Appaloosa Management, who sold approximately 265,000 shares, reducing his holding by 11.6%.
AMD Raises AI Chip Sale Forecast
AMD ended 2023 on a positive note. While overall revenue for the full year declined 4% from 2022 to $22.7bn, Q4 revenue was up 10% to $6.2bn.
Growth in the final three months of the year was driven by its data centre segment, which brought in a record $2.3bn, up 38% year-over-year, compared to its gaming segment, which reported Q4 sales falling 17% year-over-year to $1.4bn. Its embedded segment, namely its networking chips, saw revenue decline 24% to $1.1bn.
In the near term, AMD is expecting data centre revenue to be flat as a decline in demand for server chips will offset sales growth of AI chips. “For 2024, we expect the demand environment to remain mixed,” AMD President and CEO Lisa Su told analysts on the earnings call on 31 January.
Despite obvious growth challenges in other segments, AMD did raise its forecast for the current fiscal year. Sales of AI chips are now expected to reach $3.5bn, up from previous guidance of $2bn. More capacity is expected to come online in the second half of 2024.
AMD vs. Nvidia
At the end of 2023, AMD launched its Instinct MI300X chip, which, it claims, boasts more memory capacity and memory bandwidth than the Nvidia H100, as well as superior performance. At the launch event, OpenAI, Meta [META] and Microsoft [MSFT] all confirmed they have plans to use the MI300X as a cheaper alternative to Nvidia’s chips.
Demand for the Instinct MI300X chips is red hot. “I think you could say in a very generic sense, demand is as high as we have ever seen for the product,” Ryan McCurdy, President of Lenovo [0992:HK] North America, told computing publication CRN last week.
In early March, US officials ordered both AMD and Nvidia to downgrade the performance of their most powerful chips sold in China. These include AMD’s chip tailored for the Chinese market, known as the Instinct MI309.
Export controls in force since the second half of last year restrict the sale of data centre processors to companies in China. If AMD makes the necessary tweaks and the MI309 passes the export licence test, however, then it’ll be able to compete with Nvidia, which is due to launch its tailored China chip in Q2.
AMD’s AI Share Price Rally
AMD’s share price is up 89.9% in the 12 months to 2 April, making it the third-best performer among the major chipmakers, behind Nvidia [NVDA] and Broadcom [AVGO], who logged rises of 223.2% and 110.2% respectively. The stock hit an all-time high of $227.30 on 8 March.
While the stock has pulled back to close at $183.34 on 1 April, there will be some investors cautious that the share price is still in a bubble and could further reverse in the weeks and months ahead. Rather than buying the stock outright, another way to gain exposure to AMD is through thematic ETFs.
The Roundhill Generative AI & Technology ETF [CHAT] has AMD as its tenth-biggest holding, with a weighting of 3% as of 1 April. The fund is up 38.2% in the past year and up 15.9% year-to-date.
The Innovator Deepwater Frontier Tech ETF [LOUP] has allocated AMD 2.6% of its portfolio, one of its smallest holdings, as of 2 April. The fund is up 35.8% in the past year and up 9.4% year-to-date.
Disclaimer Past performance is not a reliable indicator of future results.
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