Nvidia (NASDAQ: NVDA) CEO Jensen Huang thinks data center operators will spend $1 trillion upgrading their infrastructure over the next five years in order to support demand from artificial intelligence (AI) developers. Part of that money will be spent on graphics processing units (GPUs), which are the optimal chips for AI training and AI inference.
Nvidia is the top supplier of data center GPUs, and its stock has soared 173% in 2024 on the back of powerful sales growth. However, competition is ramping up, and Advanced Micro Devices (NASDAQ: AMD) launched its own GPUs, which have attracted some of Nvidia's biggest customers so far.
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The Wall Street Journal tracks 56 analysts who cover AMD stock, and the overwhelming majority have given it the highest possible buy rating. Not to mention, there isn't a single analyst who recommends selling. Here's why AMD stock might be a great buy right now, especially for investors who already own Nvidia.
Nvidia's flagship H100 data center GPU went into production in September 2022, and it helped the company capture an estimated 98% market share in 2023 as there was practically no competition. That was until AMD launched the MI300X GPU in December, and despite being over a year behind, uptake has been very promising in 2024.
The MI300X is now used by many of Nvidia's top customers, including Microsoft, Oracle, and Meta Platforms. According to AMD, many of them are yielding better performance and a lower cost of ownership by using the MI300X compared to the H100, which is a positive sign in the company's quest to take market share from Nvidia.
AMD will start shipping its new MI325X to customers this quarter, which delivers up to 20% better AI inference performance than Nvidia's H200 (which superseded the H100 earlier this year). Since AI developers often rent computing capacity from data center operators on a per-minute basis, any improvement in speed can result in substantial cost savings.
However, investors are already looking ahead to AMD's MI350 series, which is expected to reach customers in the second half of 2025. It's based on a new architecture called CDNA (Compute DNA) 4, which will deliver a performance boost of 35 times compared to CDNA-3-based GPUs like the MI300X. The MI350 is AMD's answer to Nvidia's latest Blackwell-based GPUs, which are the source of "insane" demand (according to Jensen Huang) and have just started shipping.