AMD's AI Moment May Be Coming. Will It Seize It?

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Advanced Micro Devices stock (NASDAQ:AMD) rose nearly 7% during Tuesday trading and approximately 15% year-to-date, as investor confidence grows regarding its role in the AI chip market, with several analysts raising their price targets for the stock. So what exactly has shifted for AMD in recent months? The AI semiconductor industry is vast and continues to grow rapidly. Nvidia has a stronghold in the market and has more than doubled its revenue over the last two years, with the data center GPU market exceeding $100 billion annually. However, AMD does not need to surpass Nvidia to further enhance its stock—it simply needs to increase GPU sales, and an opportunity may be emerging.

AI Market Will Transform

In the past three years, the AI market has been characterized by significant investments from major tech companies and hyperscalers aiming to create the most advanced frontier AI models. These organizations have focused on performance and training speed, as training large language models necessitates substantial computational resources. This trend has favored Nvidia, which produces the leading chips available and possesses a well-established hardware and software ecosystem among major cloud service providers. Nonetheless, there is a genuine possibility that the rapid enhancements in frontier AI models will eventually reach a plateau. A broader array of AI workloads will transition to inference—essentially applying the developed models to real-world scenarios—where efficiency and cost are more critical than sheer computing power.

This situation could represent a chance for AMD. Not all organizations require or can afford Nvidia’s premium GPUs. Many may choose older Nvidia models or more budget-friendly alternatives like AMD’s MI series, which provide adequate memory and solid performance for inference and fine-tuning of models. Additionally, open-source models like Llama from Meta may enable more companies to run their AI workloads on-site, decreasing dependence on costly cloud computing fees. This could also benefit AMD. Meanwhile, Intel is attempting to stage a comeback Can Intel’s 18A Break TSMC’s 2nm Stronghold?

AMD’s Recent Advancements in AI

At its AI Day event, AMD introduced its MI350 series, set to launch in the second half of 2025, which it claims will deliver four times the AI compute capacity of its predecessor. The company also provided a preview of its MI400 and MI450 chips, furthering its evolving product strategy. Beyond hardware, AMD is developing its AI software and systems stack, positioning itself as a comprehensive AI provider—through its acquisitions of Brium, focused on compiler and AI software optimization, and Enosemi, specializing in silicon photonics. These strategies could also bolster AMD’s ROCm software stack, which follows an open-source, standards-based methodology, contrasting with Nvidia’s proprietary CUDA environment.

This could attract enterprises seeking flexibility and lower costs for large-scale AI deployment. AMD recently announced a partnership with Oracle to make its MI355X GPUs available through Oracle Cloud Infrastructure, offering over two times the price-performance advantage compared to previous generations for large-scale AI tasks including inferencing. Nevertheless, risks persist. Cloud providers such as Google and Amazon are developing their own custom AI chips, which could restrict long-term demand for third-party hardware solutions. Nvidia may also intensify focus on more efficient mid-tier chips as the market shifts toward inferencing. Refer to our analysis on AMD Valuation: Is AMD Stock Expensive Or Cheap? for additional insights regarding AMD’s valuation and its comparison with competitors.

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