AMD still has a gap to close with Nvidia's AI chips
- AMD reported Tuesday that its revenue rose 18% from the same time last year.
- AMD aims to close the gap with Nvidia, which holds 80% of the GPU market.
During Advanced Micro Devices' third quarter earnings call on Tuesday, CEO Lisa Su said that the company has "closed a good part of the gap" with its AI rival, Nvidia.
AMD still has a large gap with Nvidia, as it lags behind in GPUs or graphics processing units. These units are heavily used in training AI due to their ability to process large datasets. Nvidia holds more than 80% of the market.
AMD reported revenue increasing 18% year over year in its third quarter, primarily due to data center sales and an increase in Instinct GPU and EPYC CPU sales.
At the same time, analysts raised concerns about the delay in AMD's GPU offerings. Earlier this month, AMD announced that its new generation MI325X accelerator chip will begin production shipments later this year and more widespread ability in early 2025. It also plans to release MI350 next year to compete with Nvidia's highly anticipated Blackwell chip, which is expected to start shipping earlier than AMD in the fourth quarter of 2024.
Although AMD's earnings performed around the levels predicted by Wall Street analysts, stock prices dipped as much as 10% Wednesday, reflecting investors' disappointment.
Vivek Arya, a Bank of America Securities analyst, asked on the earnings call about how its chips are "kind of one year behind the industry leader."
"Can you really gain share until that gap is closed?" he asked.
Su responded that AMD's road map "actually closed a good part of that gap" with Nvidia's products and that AMD holds an advantage in data center retrofitting.
"I think MI325 is a great product. It's going to compete very well with H200, and the MI350 series will compete very well with Blackwell," Su said on the call.
When asked by Piper Sandler semiconductor analyst Harsh Kumar about what is hindering AMD from becoming a bigger GPU market player compared to Nvidia, Su said that acquiring the total addressable market takes time. Developing chips with more processing capacity can also take years of design and testing.
"We've had an extremely good product even back in the ROM days," Su said. "But it does take time to ensure that trust is built, there is familiarity with the product."
Analysts said that while AMD got a later start in GPUs than Nvidia, it is still slowly chipping away at its ground in the AI boom.
"As much as we still believe NVDA will be hard to shake from its 80-85% AI share, AMD still has done an enviable job from virtually zero to ~5% market share," Arya wrote in a note released on Wednesday.
Even if this share remains unchanged, the underlying AI growth will still provide AMD "the chance to participate," he added.
Morgan Stanley also bumped up its estimates of AMD's growth for the next quarter to $8 billion, although its analysts raised concerns about customer usage. AMD's customers include Microsoft, Meta, and Google.
"Our checks continue to show several customers that are committed to using AMD architecture, but actual usage still seems relatively small," Stanley's equity analysts wrote.