Advanced Micro Devices (NASDAQ: AMD) announced game-changing news when unveiled the MI300X super chip. The MI300X is the company’s latest development and a pure play on AI. The chip is intended to rival NVIDIA (NASDAQ: NVDA) chips, such as the H100, which run for around $30,000 each. That’s an important fact considering it takes multiple GPU Superchips to run most AI systems, and NVIDIA dominates 80% of the market.
In its efforts to make a big splash in AI, Advanced Micro Devices also offers an 8-chip AI cluster and software and architecture to support it all. If adopted by the industry, it could lead to a significant bump in revenue and earnings. The chips are slated to begin shipping later this year; NVIDIA recently issued guidance 50% above the consensus, which could easily happen for AMD.
Will The Industry Turn To AMD For AI?
The industry might begin to adopt the MI300X because it’s a better chip, at least regarding memory. The chips can store up to 192 GB of memory compared to the H100’s 120 GB, which is important for AI. AI models require large amounts of data, and the data sets are only getting bigger.
AMD CEO Lisa Su says the data center GPU market is worth about $30 billion and will grow at least 50% CAGR for the next 4 years. She expects total AI-driven data center demand to top $150 billion in 2027, a significant opportunity for the company. Five percent of that market is worth $7.5 billion or about 32% of AMD’s 2023 revenue outlook.
Reuters, citing an AWS executive, says Amazon is already considering the chip a possibility. While no decision has been made, investors should expect AWS and others to try it. Dave Brown, VP of elastic compute cloud, says the company already discounted NVIDIA for its DGX Cloud offering and is working with AMD teams to see what the 2 can develop. AWS controls over 30% of the cloud market, which would be a significant revenue and earnings driver for AMD.
The Analysts Applaud AMD’s News
The analysts were bullish on AMD before the announcement, and Marketbeat has picked up no upgrades, but it is tracking 8 new price target increases, and more are sure to come. The new consensus is still below the price action but up 20% in the last 30 days, with most new targets in the $140 to $170 range. The single outlier is Deutsch Bank which has the stock pegged at a below-consensus $110. The takeaway is that consensus is trending sharply and leading the market higher.
Institutions also support AMD. The institutions own 67% of the stock and have been buying on balance for over a year. The important detail is that activity has ramped over the last 3 quarters and is helping to drive the market higher. Assuming this continues, Advanced Micro Devices stock could easily trend higher. Buying and ownership are broad, another plus for the market.
The Technical Outlook: Advanced Micro Devices Is In An Uptrend
Advanced Micro Devices is in an uptrend and can move higher. After the announcement, the market experienced some volatility but is consolidating within a strong uptrend. The sideward movement may continue in the near term, but upward movement is expected in the short to mid-term. The stock is $13 below the low end of the new price target range, with a high likelihood that the range will move higher by the end of the year. The next quarter’s earnings report could be a blowout, assuming the AI market thinks this chip is worth a try.