The AI chip market is booming like crazy. Shares of Advanced Micro Devices have skyrocketed in the past year due to the high demand for artificial intelligence (AI) chips. Even though AMD’s AI business didn’t really take off in 2023, investors are still flocking to the company, afraid of missing out on the big money being made by Nvidia in this fast-growing market.
AMD was a little late to the game in 2023, as everyone was buying up Nvidia’s GPUs for training large language models like ChatGPT. But, they’ve started to gain some traction in this highly lucrative market, which is expected to hit a whopping $384 billion in annual revenue by 2032, growing at a compound annual rate of 38%. AMD believes its efforts will really start to pay off in this department by 2024.
So, Wall Street is a bit disappointed with AMD’s AI-related revenue guidance for this year, which fell short of expectations. But if we take a closer look, it’s not all bad news and there’s a chance that the company could really ramp up this year.
In October of last year, AMD predicted it would generate $400 million in sales from its MI300 series of AI GPUs in the fourth quarter of 2023. The company’s CEO, Lisa Su, mentioned on the earnings call that they exceeded their expectations, saying their “Data Center GPU business accelerated significantly in the quarter, with revenue exceeding our $400 million expectations, driven by a faster ramp for MI300X with AI customers.”
And with big names like Microsoft, Meta Platforms, and Oracle on board to deploy AMD’s MI300 Instinct family of data center GPUs, the company expects its data center GPU revenue to exceed $3.5 billion in 2024.
It’s also important to note that AMD significantly raised its revenue guidance from AI chip sales within just one quarter, indicating potential growth ahead. Nvidia may be the leader in the AI chip market, but AMD is expected to make its mark in 2024, potentially capturing between 15% and 25% of the market.
Potential factors like TSMC’s advanced packaging capacity and AMD filling the supply gap in the market make it likely that the company could continue to raise its AI guidance as the year progresses.
So, despite missing expectations, there’s potential for significant growth for AMD in 2024 and beyond. If they can secure more supply and customer commitments for their AI processors, they could be on track for a great year according to analysts.