AMD's Revolutionary AI Chip Set to Challenge Nvidia's Dominance
AMD's new AI chip launch may have left some investors uninspired, but Wall Street remains enthusiastic and confident in the semiconductor company's ability to challenge Nvidia and emerge as an AI winner. While the stock experienced a 3.6% dip following AMD CEO Lisa Su's unveiling of the MI300X chip, experts believe the company is on the right track.
During the unveiling event held in San Francisco, Lisa Su revealed that customers would be able to sample the new technology in the third quarter, with production ramping up in the fourth quarter. Moreover, Su projected a substantial increase in the total addressable market (TAM) for data center AI accelerators. According to her, the TAM is expected to reach an impressive $150 billion by 2027, up from approximately $30 billion this year.
Despite the temporary setback in stock performance, AMD's shares have experienced a remarkable climb of over 90% so far in 2023, primarily fueled by the growing interest and hype surrounding artificial intelligence. The stock even showed a promising upward trend, surging more than 2% in premarket trading the day after the chip announcement.
Some analysts, such as those from KeyBanc Capital Markets, believe that investors' disappointment might stem from the lack of news regarding Microsoft's involvement as a customer for the new chip. However, the analysts noted that this expectation was unrealistically high, considering that customers won't begin sampling the chip until the third quarter. Nevertheless, they remain optimistic about AMD's prospects, reiterating an Overweight rating and setting a price target of $150, which suggests a 20% upside compared to the previous day's closing price.
Piper Sandler analysts also maintain an Overweight rating and a $150 price target for the stock. They commended AMD's comprehensive AI strategy, emphasizing the significant increase in the overall TAM projection from $65 billion to $150 billion by 2027. This strategy, coupled with the company's focus on addressing both cloud and enterprise customer needs, positions AMD as a strong contender in the AI market.
Stifel analysts raised their price target to $145 from $98 while reaffirming their Buy rating. Although questions were raised regarding the absence of a formal customer announcement alongside the roadmap update, the analysts expressed confidence in AMD's product specifications, which they believe will enable the company to gain traction in the large language model (LLM) and AI markets.
With the positive sentiment from analysts and the continued advancements in AI technology, AMD's new AI chip is poised to disrupt the market and challenge Nvidia's dominance. As the competition between these tech giants intensifies, the future of AI innovation looks promising, and investors eagerly await further developments from both companies.
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