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AMD’s Future Hinges on AI Chip Success

Tech
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Chipmaker Advanced Micro Devices (AMD) offered an optimistic forecast this week for its new data center AI accelerator chip, predicting $2 billion in sales for the product in 2024. This ambitious target represents a crucial test for AMD as it seeks to challenge rival Nvidia’s dominance in the artificial intelligence (AI) chip market.

AMD’s forthcoming MI300X processor combines the functionality of a CPU and GPU onto a single chip optimized for AI workloads. The chipmaker claims the MI300X will deliver leadership performance and energy efficiency. AMD has inked deals with major hyperscale cloud customers to use the new AI chip, including Amazon Web Services, Google Cloud, Microsoft Azure and Oracle Cloud.

The $2 billion revenue projection for 2024 would represent massive growth considering AMD expects a modest $400 million from the MI300X this quarter. However, industry analysts caution that winning significant market share from Nvidia will prove challenging despite AMD’s technological advancements. Nvidia currently controls over 80% of the data center AI accelerator market, fueled by its popular A100 and H100 chips.

“The AI chip market is still in its early phases, but it’s clear Nvidia has built formidable customer loyalty over the past decade,” said Patrick Moorhead, President of Moor Insights & Strategy. “AMD will need to aggressively discount and wow customers with performance to take share.”

AMD’s fortunes sank earlier this year as the PC market slumped and excess inventory weighed on sales. Revenue from the company’s PC chips dropped 42% in the third quarter. However, AMD sees data center and AI products driving its future growth. The company aims to increase data center revenue by over 60% next year, assuming the MI300X gains traction.

But AMD faces headwinds in China due to new U.S. export rules limiting the sale of advanced AI chips there. “AMD’s ambitious sales target could prove difficult to achieve given the geopolitical climate,” said Maribel Lopez, Principal Analyst at Lopez Research. China is investing heavily in AI and domestic chipmakers like Baidu will be courting the same hyperscale customers.

Meanwhile, Intel aims to re-enter the data center GPU market next year with its new Ponte Vecchio chip. Though still behind Nvidia and AMD, Intel boasts financial resources and manufacturing scale that shouldn’t be underestimated. The AI chip market could get very crowded very quickly.

AMD CEO Lisa Su expressed confidence in meeting customer demand and hitting sales goals for the MI300X. She expects AMD’s total data center revenue mix to shift from approximately 20% today to over 40% by 2024. “The AI market presents a tremendous opportunity for AMD to grow and diversify,” commented Su.

With PC sales stabilizing, AMD raising its AI chip forecast provided a sigh of relief for investors. The company’s stock rebounded from earlier losses after management quantified the 2024 sales target. All eyes will now turn to AMD’s execution ramping production and adoption of the MI300X over the coming year. AMD finally has a shot at becoming a major player in the AI chip wars—as long as the MI300X lives up to the hype.

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