Developing artificial intelligence (AI) software wouldn't be possible without data centers and the powerful graphics processing chips (GPUs) inside them. For the past 18 months, Nvidia (NASDAQ: NVDA) has dominated the GPU industry with a staggering market share of up to 98%.
But competition was bound to emerge, and Advanced Micro Devices (NASDAQ: AMD) has stepped up to the plate with an exciting GPU roadmap. The company hosted its "Advancing AI" event on Oct. 10, where its CEO Lisa Su provided an update on its next-generation chips.
Although Advanced Micro Devices is still trailing Nvidia in the market for AI GPUs, Su's comments suggest the company is catching up at a rapid clip. Here's why investors should be excited.
Image source: Getty Images.
Advanced Micro Devices was more than a year behind Nvidia in the AI GPU race
Nvidia's H100 GPU set the benchmark for AI training and AI inference . The chip went into full production in September 2022, although sales didn't ramp up until 2023, when AI fever gripped the tech sector. The H100 is still a hot product today, and Nvidia continues to struggle with supply constraints because demand is so high from leading AI companies like OpenAI , Amazon , Microsoft , and more.
Those supply challenges have opened the door for competitors like Advanced Micro Devices to steal some market share. The company announced its own data center GPU called the MI300X at the end of 2023, which was specifically designed to compete with the H100. So far, it has attracted some of Nvidia's top customers, including Microsoft, Oracle , and Meta Platforms .
In fact, Advanced Micro Devices says some of those customers are seeing performance and cost advantages by using the MI300X compared to the H100. Despite being more than a year behind in terms of a launch date, the challenger delivered a very worthy product. It forecasts the MI300 series will propel its GPU revenue to a record $4.5 billion in 2024 -- an estimate that has already been raised twice.
But Nvidia still has the edge . It started shipping its new H200 GPU earlier this year, which is capable of performing AI inference at nearly twice the speed of the H100. It meant Advanced Micro Devices was still a step behind. However, at the Advancing AI event, Lisa Su offered fresh details on her company's new MI325X, which will deliver 80% more high-bandwidth memory than the H200 and 30% better inference performance.
That's great news, but it isn't expected to ship until the first quarter of 2025.
The race to catch up doesn't stop there. Nvidia is now focused on its latest Blackwell chip architecture, which paves the way for the biggest leap in performance so far. The new GB200 NVL72 system is capable of performing AI inference at a whopping 30x the pace of the equivalent H100 system. Each individual GPU will be priced comparably to the H100 (when it was first launched), so Blackwell is going to deliver an incredible improvement in cost efficiency.
In other words, even though Advanced Micro Device's MI325X might be a superior product to the H200, it's going to be significantly behind Nvidia's newest hardware.
Advanced Micro Device's Blackwell competitor is right around the corner
Here's where things get exciting. Lisa Su told the audience at Advancing AI that the company is preparing to ship another new GPU next year called the MI350X. It's based on its new CDNA (compute DNA) 4 architecture, which offers a staggering leap in performance of 35x, compared to CDNA 3 chips like the original MI300X.
Advanced Micro Devices has explicitly said the MI350X will compete directly with Nvidia 's Blackwell chips.
Nvidia plans to ramp up shipments of Blackwell GPUs during its fiscal 2025 fourth quarter (which runs from November to January), whereas Su said Advanced Micro Devices will start shipping the MI350X in the second half of calendar 2025. That means after lagging behind Nvidia by more than a year with the MI300X, Advanced Micro Devices has an opportunity to reduce Nvidia's lead to just months with the MI350X.
Advanced Micro Devices will report its latest financial results in a few weeks
The company could provide further updates on its new chips when it releases its financial results for the third quarter of 2024 (ended Sept. 30), which is expected to happen on or around Oct. 29.
During the second quarter, Advanced Micro Devices generated a record $2.8 billion in data center revenue, which was a 114% increase from the year-ago period. Another strong result could prompt management to lift its full-year GPU sales forecast beyond $4.5 billion. Given the company's track record on that front, there's a good chance it will happen.
Advanced Micro Devices stock currently trades at a very expensive price-to-earnings ratio (P/E) of 200.3 because it has generated modest earnings per share (EPS) of $0.82 over the past four quarters. For perspective, the Nasdaq-100 technology index currently trades at a P/E of 32.1.
However, Wall Street analysts estimate the company could deliver $5.43 in EPS during 2025, placing the stock at a more reasonable forward P/E of 30.6:
Advanced Micro Devices P/E Ratio data by YCharts.
That means Advanced Micro Devices stock could be a great buy right now for investors who are willing to hold onto it for at least a couple of years -- especially with the MI325X and MI350X rolling out in 2025.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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