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AMD Shares Surge on AI Chip Demand Optimism

2024.01.17

 

Key Takeaways

  • AMD shares soar on heightened demand for its AI chips.
  • Analysts optimistic about AMD’s potential in competing with Nvidia in AI market.

AMD’s Rising Fortunes in AI Market

AMD shares witnessed a significant surge on Tuesday, climbing over 8% to their highest closing price since achieving a record in November 2021. This uptick in AMD’s stock is fueled by optimism surrounding the company’s artificial intelligence (AI) chips, which are gaining increased demand from notable tech entities like Microsoft, Google, and OpenAI. This positive market sentiment reflects growing confidence in AMD’s role in the burgeoning AI industry.

Analysts Raise Price Targets

Tom O’Malley, an analyst at Barclays, uplifted his price target for AMD from $120 to $200, citing strong demand for the MI300, AMD’s premier machine learning chip for servers. KeyBanc analysts also elevated their price target for AMD to $195, alongside a significant raise for Nvidia to $740, attributing these changes to robust demand for AI servers. AMD closed at $158.74 on Tuesday, nearing its all-time high, while Nvidia, a major player in the AI chip market, saw its shares increase by 3%.

AMD’s Competitive Edge in AI

In late 2023, AMD announced the launch of new server chips for AI, positioning itself as a competitor to Nvidia’s H100 and A100 GPUs, which are integral to OpenAI’s model training and deployment. Both AMD and Nvidia are key producers of graphics processing units (GPUs), originally developed for computer gaming but now essential for AI model training and operation. Nvidia has enjoyed a considerable advantage in this market, having developed AI software for its chips over a decade ago.

Venture Capitalist and Analyst Perspectives

Venture capitalist Jim Breyer expressed strong support for both Nvidia and AMD, emphasizing Nvidia’s successful integration of a software layer around its chips. However, analysts believe that AMD is enhancing its AI software capabilities and anticipate major chip buyers, including cloud providers and tech giants, to seriously consider utilizing AMD GPUs. The desire for a second source in the AI chip market is expected to mitigate any difficulties in the software ecosystem.

Conclusion: A Competitive Future for AI Chips

AMD’s recent success in the stock market, driven by heightened demand for its AI chips, signifies a potential shift in the competitive landscape of AI technology. With analysts projecting AMD to improve its AI software and gain traction with major cloud providers and tech giants, the company is poised to challenge Nvidia’s dominance. As the AI market continues to expand, the rivalry between AMD and Nvidia is set to intensify, bringing new innovations and choices to the forefront of AI technology development.

 


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