Over the past two years, Nvidia (NVDA +2.17%) and Broadcom (AVGO +0.08%) became the first two $1 trillion chipmakers. Nvidia, which reached the $1 trillion mark in 2023, is now worth $4.3 trillion. Broadcom, which hit that milestone last year, is worth $1.8 trillion.
The rapid expansion of the artificial intelligence (AI) market propelled both chipmakers into the 12-zero club. Sales of Nvidia's data center GPUs, which are used to process complex AI tasks, skyrocketed as companies launched more generative AI applications. Sales of Broadcom's networking, optical, and custom accelerator chips to AI infrastructure providers also surged. Nvidia and Broadcom are still the only two trillion-dollar chipmakers, but several smaller AI-oriented chipmakers might join that elite group in the near future. One of those chipmakers might be AMD (AMD 0.84%), which currently has a market cap of about $350 billion.
Image source: Getty Images.
How is AMD becoming an AI chipmaker?
AMD is the world's second-largest producer of x86 CPUs and discrete GPUs. It's a fabless chipmaker that outsources its production to top foundries like TSMC (TSM 1.27%).
AMD controls 38.6% of the x86 CPU market, according to PassMark Software, while Intel (INTC 6.11%) holds a 60.1% share. AMD only controls 6% of the discrete GPU market, according to JPR, while Nvidia dominates the remaining 94%. Over the past decade, AMD's share of the CPU market rose as Intel struggled with production issues and delays at its first-party foundries. AMD, which relied on TSMC to produce its top-tier CPUs, pulled ahead of Intel with smaller, denser, and cheaper chips. But it struggled to expand its share of the discrete GPU market as Nvidia launched more low-end PC GPUs and data center GPUs.
Yet AMD's robust sales of Ryzen CPUs for PCs and Epyc CPUs for servers offset its slower sales of discrete GPUs for PCs. It also launched its first batch of data center GPUs (MI6, MI8, and MI25) in 2017. In late 2023, it launched its first MI300 Instinct GPUs, which were built on TSMC's 5nm and 6nm nodes, to challenge Nvidia in the AI market.
NASDAQ: AMD
Key Data Points
How fast is AMD's AI business growing?
Today, a lot of AMD's growth is driven by its data center business, which houses its AI-oriented Epyc CPUs and Instinct GPUs. That segment's secular expansion complements the cyclical growth of its client and gaming segment, which sells its Ryzen CPUs and Radeon GPUs for PCs as well as it custom APUs (accelerating processing units) for gaming consoles. In its latest quarter, AMD generated 47% of its revenue from its data center business, 43% from its client and gaming business, and 9% from its embedded segment -- which sells its embedded CPUs, GPUs, APUs, field-programmable gate arrays (FPGAs), and other custom chips. Here's how those three core business fared over the past year.
|
Revenue Growth by Segment (YOY) |
Q3 2024 |
Q4 2024 |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|---|---|
|
Data center |
122% |
69% |
57% |
14% |
22% |
|
Client and gaming* |
(21%) |
(1%) |
28% |
69% |
73% |
|
Embedded |
(25%) |
(13%) |
3% |
4% |
8% |
|
Total |
18% |
24% |
36% |
32% |
36% |
Data source: AMD. YOY = Year over year. *Reported separately until 2025.
AMD's data center business cooled off over the past year as it grappled with tighter export curbs on its shipments to China, macro headwinds for enterprise spending, and intense competition from Nvidia -- which locks in its customers with massive financing deals and proprietary software.
However, AMD's Instinct GPUs cost a lot less than Nvidia's comparable data center GPUs -- and they're still attracting big orders from AI software giants like OpenAI, Microsoft, Oracle, and Meta Platforms. The rollout of its next-gen MI350 GPUs throughout the second half of 2025 could lock in those customers and further widen its moat against Nvidia. As that core business expands, its other two cyclical segments are gradually recovering.
Could AMD become a $1 trillion chipmaker?
From 2024 to 2027, analysts expect AMD's revenue and adjusted earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 34% and 45%, respectively, as its data center segment expands. Its stock still looks reasonably valued (but it isn't a bargain) at 34 times next year's earnings.
If AMD matches analysts' expectations through 2027, grows its EPS at a CAGR of 20% over the following nine years, and trades at 30 times forward earnings in 2035, its stock price could rise more than sevenfold to about $1,548 per share over the next decade, boosting its market cap to nearly $2.5 trillion.
Therefore, AMD clearly has a shot at becoming the next $1 trillion chipmaker. It won't overtake Nvidia as the top data center GPU maker over the next 10 years, but it will likely carve out a defensible and growing niche with its cheaper AI-oriented CPUs and GPUs.
