Advanced Micro Devices (NASDAQ:AMD) stock might not be racking up the same sort of stellar gains as Nvidia (NASDAQ:NVDA) this year, but advancing 81% is no small feat. And it’s also a 4-to-1 drubbing of the S&P 500.
Like its chip rival, AMD delivers on the promise of artificial intelligence. Its new AI accelerator chip, the Instinct MI300X, holds great potential and could steal market share from Nvidia. That’s because it is aimed directly at the heart of its rival’s main business, data centers, and is where Nvidia is most vulnerable.
AI and AMD Stock
AMD is no stranger to being runner-up. For long periods it and Intel (NASDAQ:INTC) would battle for supremacy in personal computing chips. They often switched places as their latest chips hit the market. AMD is still a powerhouse in that field and as the segment recovers, it could give the chip maker an edge elsewhere.
PC shipments are still falling, down 7.6% in the third quarter, but the rate of decline is easing. It’s a slow path to recovery, but next year could be pivotal for AMD stock. Microsoft (NASDAQ:MSFT) is ending support for Windows 10 and a device upgrade cycle could send PC sales climbing once more.
AMD’s Ryzen chips are now infused with AI capabilities. HP (NYSE:HPQ), which uses those chips (but also Nvidia chips), plans to introduce its first AI PC next year.
AMD is also working with Microsoft on the next generation of Windows that will feature AMD’s on-chip AI Engine. The marriage of AI and PCs could spark a whole new round of PC sales itself.
The MI300X accelerator could be the real game changer. It is considered by some to be even better than Nvidia’s AI offering. The chip unifies the semi’s CPUs and GPUs on a single processor by sharing memory and providing greater efficiency.
CEO Lisa Su told analysts AMD has “commitments for significant capacity across the entire supply chain” for the new chips.
It has already seen a seven-fold increase in interest by customers in its AI offerings.
“Multiple customers initiated or expanded programs supporting future deployments of Instinct MI250 and MI300 hardware and software at scale,” Su said.
Closing the Gap
Advanced Micro Devices might not catch up to Nvidia. The latter promises to release its own advanced AI chip, the Grace Hopper Superchip, soon. Analysts say it is every bit as capable as the MI300.
And where AMD has $22 billion in annual sales, NVDA has twice that amount. While those numbers cross a lot of categories, AI promises to blur the distinctions between them. It will infiltrate all aspects of both chip maker’s offerings. So even if AMD doesn’t surpass its rival, it doesn’t mean it’s not the better stock to buy.
For one, the market is still young and growing. There is plenty of room for numerous winners. Due to its leadership position, NVDA stock trades at a premium. Yet there are a few chinks in its armor. With the stock priced for perfection, trade restrictions on technology to China put it at risk.
AMD stock, on the other hand, is a bit more of a bargain. Nvidia trades at 25 times sales, whereas AMD goes for 8. With arguably the better AI chip to hit the market first, Advanced Micro Devices could be the real AI winner for investors even if it doesn’t become top dog.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
