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AMD: “Advancing AI” Event Shows a Promising Roadmap

We continue to anticipate high volatility in our AI GPU estimates.

In this photo illustration, the AMD company logo is seen displayed on a screen.
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Advanced Micro Devices Inc
(AMD)

Key Morningstar Metrics for Advanced Micro Devices

Advanced Micro Device’s AMD Advancing AI event introduced several new products in semiconductors, software, and services. Highlights include the Instinct MI350 series of AI GPUs, a preview of next year’s rack scale solution, the “Helios” MI400 series, and advancements in the firm’s ROCm software ecosystem.

Why it matters: We’re encouraged by AMD’s advancements in AI, especially rack-scale solutions such as Helios. While we still believe Nvidia is ahead of AMD on AI hardware, and perhaps still sizably ahead on AI software, we think AMD will carve out a piece of the pie over time.

  • AMD brought several large tech partners on stage, most notably Sam Altman, founder of OpenAI. We continue to believe large AI and cloud leaders will continue to support AMD as an external alternative to Nvidia’s dominant (but capable) solutions.

The bottom line: We maintain our $120 fair value estimate for narrow-moat AMD. Shares appear fairly valued and reflect our thesis that AMD will win a piece of AI, while likely gaining significant share in x86 CPUs in PCs and servers.

  • Shares traded down modestly on June 12, as several AMD announcements were relatively well known. Shares were up over 9% on June 16, perhaps because of rumored GPU wins with Amazon (as mentioned by CNBC). AWS was a title sponsor for AMD’s event.
  • We continue to anticipate high volatility in our AI GPU estimates. On the upside, AMD could see exponential growth if it were to expand with any hyperscaler or sovereign buildout. On the downside, Nvidia may still dominate AI, relegating AMD to niche status.

Coming up: AMD also lifted its industrywide AI accelerator forecast, now expecting revenue to exceed its prior forecast of $500 billion by 2028.

  • AI inference workloads should lead the way, with AMD forecasting an 80% CAGR for this segment of AI computing chipsets. AI revenue, in total, should rise at a 60% CAGR from the $45 billion earned in 2023.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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