Nvidia (NVDA:US) garnered significant attention on Wall Street in the previous year, benefiting from a surge in artificial intelligence (AI) that propelled its business. With a remarkable 224% year-over-year increase in its stock value and robust earnings, the company has been the primary provider of graphics processing units (GPUs) in response to the heightened demand in the AI sector.
While Nvidia still has considerable growth potential, its exceptional performance in the past year has led to a relatively higher valuation. Consequently, many investors are actively seeking the "next Nvidia" – a company with the capability to satisfy the growing demand for chips and generate substantial returns in a similar fashion.
Opting for Advanced Micro Devices (AMD:US) seems like a straightforward and compelling choice as an alternative to Nvidia. AMD has established strong footholds in numerous industries and has consistently held the second-largest market share in desktop GPUs for an extended period. Additionally, AMD is poised to introduce a new AI GPU this year, presenting a challenge to Nvidia's current offerings. AMD has established strong footholds in numerous industries and has consistently held the second-largest market share in desktop GPUs for an extended period.
While AMD may not necessarily surpass Nvidia, the rapidly expanding markets such as AI suggest that there is ample space for Nvidia to maintain its dominance and for AMD to emerge as a significant player in the realm of AI chips.
Anticipate AMD's Significant Impact on the AI Landscape in the Coming Year
The introduction of OpenAI's ChatGPT in November 2022 prompted a reevaluation of the potential of AI. Enthusiasm surged as the public recognized its capacity to propel various industries forward, including healthcare, consumer products, education, manufacturing, autonomous vehicles, and beyond. Nvidia stood out as the primary chip supplier in the rapidly expanding market. Nevertheless, the success underscored the notable gap that other chipmakers, such as AMD, had experienced in falling behind in the field of AI.
Consequently, AMD dedicated the remainder of the year to crafting hardware capable of rivalling Nvidia, and the fruits of its labour are now evident. AMD introduced the MI300X AI GPU in December, asserting that it stands shoulder-to-shoulder with Nvidia's H100 in terms of training capabilities and outperforms the H100 in inference by 10% to 20%.
AMD's latest chip has quickly garnered attention, especially with Microsoft's announcement in November that its Azure cloud platform would be the inaugural platform to leverage the MI300X for optimising AI capabilities. Microsoft's significant 49% stake in OpenAI positions it as a robust ally for AMD. In addition to a partnership with Meta, where the new chips will also be utilised, AMD appears poised for a promising future in the field of AI.
AMD introduced the MI300X AI GPU in December, asserting that it stands shoulder-to-shoulder with Nvidia's H100 in terms of training capabilities and outperforms the H100 in inference by 10% to 20%.
In 2023 Nvidia achieved a historic milestone by becoming the first chipmaker to surpass a market capitalization of $1 trillion. While AMD's market cap currently stands at $237 billion, a considerable distance from that milestone, it suggests the company may possess substantial long-term growth potential.
Summary
The market may increasingly appreciate AMD's accelerated growth, particularly given its substantial opportunity in the AI chip market. For astute investors seeking growth stocks to benefit from the rising adoption of AI and the resurgence of the PC market, incorporating AMD into their portfolios before witnessing further surges could be a prudent move.
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Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.
