AMD Accelerates GPU Roadmap to Challenge Nvidia’s Dominance – New Product Launches Set to Shake Up Market in FY 2024

San Francisco, CA – Advanced Micro Devices, Inc. based in San Francisco, CA, has been making strides in the chip industry, with its stock rising by over 41% in the past year. Despite this growth, the company still lags behind its competitor, Nvidia Corporation, which has exceeded industry expectations. AMD is gearing up to introduce new products and boost shipments of the Instinct MI300X accelerator in the fiscal year 2024, aiming to bolster its support for AI workloads. Additionally, AMD plans to expedite its GPU roadmap by launching new Instinct chips in the fourth quarter of 2024 and throughout the fiscal year 2025, creating opportunities for revenue growth and free cash flow enhancement.

The launch of two new processors is on the horizon for AMD – the AI 300 Series for laptops, set to be released on July 17, 2024, and the Ryzen 9000 Series processors for desktops, with shipments starting in August 2024. These new chips target content creators with demanding AI workloads, providing potential catalysts for AMD’s core processor business. Moreover, AMD’s recent acceleration in its GPU product pipeline aims to increase competitiveness with Nvidia’s H100, with the introduction of the Instinct MI300X accelerator earlier this year challenging Nvidia’s dominance in the Data Center GPU market.

According to Wells Fargo, Nvidia currently commands a substantial 94% market share in the Data Center GPU market, leaving AMD with a share slightly over 4%. However, with the expansion of AMD’s AI chip lineup, there is a possibility of significant market share gains from Nvidia in the coming quarters. The soaring demand for AI GPUs, coupled with Nvidia’s supply constraints, present an opportunity for AMD to capitalize on its product releases and potential shipment upticks of the MI300 accelerator in the second quarter of 2024. The upcoming launch of the AMD Instinct MI325X accelerator in the fourth quarter of 2024 and the AMD Instinct MI350 Series in the fiscal year 2025 are poised to further bolster AMD’s position in the market.

In its recent earnings report, AMD highlighted robust demand for the Instinct MI300 accelerator, indicating a promising trajectory for increased free cash flow in the years ahead. With a projected Data Center GPU revenue of over $4.0B for fiscal year 2024, AMD anticipates a potential doubling of GPU-related revenues in the following year due to the strong market demand. While Nvidia has shown substantial revenue growth compared to AMD, the accelerated shipments of the Instinct MI300 in the second quarter of 2024 position AMD for enhanced revenue and free cash flow growth in the near future. This growth potential could propel AMD to significantly improve its free cash flow margin and generate substantial free cash flow by the end of fiscal year 2025.

In terms of valuation, AMD presents an appealing opportunity given its current lower valuation relative to Nvidia. The company is expected to grow its earnings per share faster than Nvidia in the long run, driven by its GPU development advancements catching up to Nvidia’s. With a price-to-earnings ratio of 29.5X, AMD is positioned for potential valuation growth, supported by its aggressive product roadmap for GPU releases and associated free cash flow catalysts. The succession of new Instinct chips hitting the market during high GPU demand signals a positive outlook for AMD, potentially leading to a revaluation and narrowing the gap between AMD and Nvidia.

AMD’s underdog status in the AI GPU market holds promise as the company gears up to launch a series of AI-focused processors, enhancing its revenue and free cash flow prospects. The upcoming releases in the Instinct Series could position AMD favorably in terms of free cash flow potential, offering an attractive risk-reward profile. With the potential for significant revenue growth and increased free cash flow margins, AMD’s trajectory in the chip industry is compelling and worth watching closely.