Has Jeff Bezos Found the Next Nvidia?
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There's no question that Nvidia (NASDAQ:NVDA) has been the flagbearer for the AI boom thus far. Even after the recent pullback, the stock is still up more than 600% since start of 2023, adding trillions in market value along the way.
However, past performance is not a guarantee of future returns, and the AI rally is starting to broaden as investors look for alternatives to Nvidia, which may struggle to get back to its peak this year. One chip stock that looks like it has a good chance of outperforming Nvidia over the rest of the year is Advanced Micro Devices (NASDAQ:AMD), the fabless chip maker best known for its PC CPUs that is now seeing rapid growth from data center GPUs.
Let's take a few reasons AMD can beat Nvidia in the second half of the year.
1. Its chief rival is faltering
AMD's main competition in the PC, or client market, is Intel (NASDAQ:INTC), the chipmaker that has dominated the PC CPU market since its early days and still has a majority of market share in the segment.
Intel just announced its biggest restructuring in years, with plans to lay off at least 15% of its workforce through the end of 2025 as part of a plan to cut $10 billion in costs. The company also reported disappointing second-quarter earnings, issued weak guidance, and eliminated its dividend. In total, the announcement portrayed a company in disarray in spite of CEO Pat Gelsinger's having had three years to mount a turnaround at the legacy chipmaker.
Intel stock plunged on the news, and its retrenchment seems to open up an opportunity for rival AMD.
The next battleground between the two companies could be the AI PC chip market, and AMD seems likely to have an advantage here. AMD CEO Lisa Su aid that the reviews of its new AI PC products like the Zen 5 platform are “very positive” and was bullish on growth in the PC market heading into 2025, calling it “a good revenue growth opportunity for us.”
Intel also expressed optimism about its Lunar Lake AI PC chip but acknowledged that it could be a drag on margins because of its outsourced components, meaning it won't be the game-changer that Intel seems to need.
AMD also has much more momentum in the client segment at the moment, with second-quarter revenue in that segment jumped 49% to $1.5 billion. Intel, meanwhile, reported just 9% growth in that segment to $7.4 billion.
Expect AMD to continue gaining market share from Intel in the massive market.
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2. Data center revenue is taking off
AMD's Mi300 data center GPU is now available, and it's rapidly gaining traction. Data center revenue jumped 115% in the second quarter to $2.8 billion, making up nearly half of the company's revenue in the quarter.
Mi300 topped $1 billion in quarterly revenue for the first time, and its customer base is expanding as Microsoft became the first cloud infrastructure to open general availability to the Instinct Mi300X. Instinct is AMD's data center platform, and AMD said that major server makers such as Dell and Super Micro Computer have Instinct platforms in production.
Data center revenue tends to be higher margin than other segments, which should drive AMD's profit higher in the coming quarters as the company expects strong data center growth to continue.
The company also just acquired Silo AI, Europe's largest private AI lab, which will help strengthen its development of generative AI technologies such as inference and training, as well as large language models.
3. Nvidia's Blackwell delay also gives AMD an opportunity
Nvidia recently found a design flaw in its new Blackwell platform that's causing a three-month delay in new chips. There's still a shortage of data center GPUs, and the news could give an opening to AMD to grab more market share. It could also weigh on Nvidia's results over the next few quarters.
While Nvidia's leadership in the data center GPU market isn't in jeopardy, as it's much larger than its rivals such as AMD, the Blackwell delay could also weigh on its stock price and cause some reputation damage. It may be the most meaningful setback to Nvidia since the AI rally began.
The future for AMD
With Nvidia now trading at a market cap of $2.7 trillion and its growth now set to slow, its upside potential seems more limited than AMD's, which could double off its current market cap of $220 billion as data center revenue accelerates and it takes market share from Intel.
Recent declines in the gaming and embedded segments should soon bottom out as well lifting overall results. It won't take much to deliver significant bottom-line gains for AMD. If it can top estimates, the stock could soar in the coming months.
Musk's new company could top a trillion?
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Elon Musk has predicted that his new venture – something I'm calling “X-9840″ – could become “a trillion dollar company.” Today, only three companies in the US are worth more than $2 trillion. Microsoft… Apple…and Nvidia. And each of those companies gave their early investors the chance to become millionaires over several decades – starting with just a $1,000 investment. That's why I believe Elon is about to mint a new round of millionaires across America with this new venture. Unfortunately, most people will end up missing out… Because this has nothing to do with electric vehicles… Self-driving cars, rockets, brain chips, or satellites. Click here to see the details because you don't have much time to act. Elon has said he could flip the switch “as early as mid 2024.”
