Investors have crowned Nvidia (NASDAQ: NVDA) king of the artificial intelligence (AI) industry. It's easy to see why: It supplies the lion's share of the semiconductors that power the most advanced AI applications.
But Nvidia's hold on this lucrative market might soon weaken. Advanced Micro Devices (AMD 1.31%) is gearing up to wrestle away market share from its longtime rival.
Here are three things investors should know about AMD's AI ambitions -- and why you might want to consider picking up some of its shares today.
1. AMD is entering the AI arena
Nvidia accounts for over 70% of AI chip sales, according to some estimates. Companies like Microsoft (NASDAQ: MSFT) need these advanced chips to operate their cloud data centers. But no company wants to rely on a single supplier for such crucial infrastructure, so competition would be welcomed.
AMD wants to be the new entrant the market craves. Its forthcoming MI300X accelerators are designed to train and run the large language models that power generative AI applications like ChatGPT. With 192 gigabytes of fast and power-efficient memory, AMD's new chips are expected to stack up well against Nvidia's popular H100 processors.
So it's no surprise that companies are lining up to test AMD's AI chips. "Customer interest in MI300X is very high," CEO Lisa Su said during AMD's second-quarter earnings call in August. "There are a number of customers that are looking to deploy as quickly as possible."
2. Industry giants want to partner with AMD
Microsoft is reportedly one of the companies with a strong interest in AMD's new graphics processing units (GPUs). Kevin Scott, Microsoft's chief technology officer, said at a recent tech conference that AMD is "making increasingly compelling GPU offerings that I think are going to become more and more important to the marketplace in the coming years."
AMD already supplies Microsoft with chipsets for its Xbox game consoles and is a key provider of processors for Windows-powered computers. Now, the chipmaker wants to make deeper inroads into the booming AI data center market. And judging by Scott's comments, it's poised to do just that.
3. AI is a massive opportunity for AMD
AI-fueled demand for semiconductors is skyrocketing, according to Su. For many of AMD's customers, "first, second, and third priority are around AI, AI, AI," she said in late September.
In turn, Su thinks the market for AI accelerators will exceed $150 billion by 2027. For a business with less than $22 billion in revenue over the trailing 12 months, earning even a small share of this huge potential market could provide a powerful boost to AMD's sales and profits. Moreover, Su believes artificial intelligence will have a profound impact on the global economy.
If you think about the technology trends that we've seen over the last 10 or 20 years -- whether you're talking about the internet or the mobile phone revolution or how PCs have changed things -- AI is 10 times, 100 times more than that in terms of how it's impacting everything that we do. So if you talk about enterprise productivity, if you talk about personal productivity or society, what we can do from a productivity standpoint, it's that big.
Rather than a short-term boost to AMD's results, in Su's opinion, AI is a "10-year cycle," during which enormous sums will be spent on the infrastructure required to harness the power of this game-changing technology.
Su wants AMD to capture a sizable share of this booming market, and she has positioned the semiconductor leader to be a formidable force in the rapidly expanding AI industry.
