AI Supremacy Showdown: Nvidia versus AMD

Published Date::27/09/2024

Nvidia and AMD are vying for dominance in the AI chip market, but which stock is the better bet?

The semiconductor industry has received a significant boost from the growing adoption of artificial intelligence (AI) technology. Nvidia has been one of the biggest beneficiaries, with its stock shooting up 135% so far in 2024. The company's dominance in the AI graphics processing unit (GPU) market, with an estimated 94% market share, has contributed to its success.

However, Advanced Micro Devices (AMD) has been lagging behind, with its stock up only 6% this year. Despite this, AMD has been making strides in the AI market, particularly in the client segment, where its Zen 5 Ryzen processors have been developed to power AI applications on PCs.

Nvidia's data center revenue has been impressive, reaching a record $26.3 billion last quarter, up 154% from the same period last year. In contrast, AMD's data center revenue was $2.8 billion, up 115% year over year. Nvidia's data center business is expected to generate $200 billion in revenue in 2025, according to KeyBanc analyst John Vinh.

The company's upcoming Blackwell chips are expected to drive serious revenue growth, with analysts estimating that Nvidia's revenue in calendar 2025 could hit $204 billion. This is well ahead of consensus expectations.

On the other hand, AMD's data center GPU revenue is expected to hit at least $4.5 billion in 2024, a significant increase from last year. However, this is still a far cry from Nvidia's data center revenue.

Despite this, AMD has been gaining ground in the client CPU market, controlling just over a third of this space. The company is well-placed to make the most of the growing demand for AI-capable PCs, with Counterpoint Research estimating that three out of four laptops shipped in 2027 will be AI-capable.

AMD's data center business can also get a boost thanks to the growing demand for general-purpose server CPUs required in the development of small AI models as well as for inferencing purposes. Intel estimates that general compute chips such as server CPUs could generate $24 billion in annual revenue in 2027.

In conclusion, while AMD has been making strides in the AI market, Nvidia's dominant position in the AI GPU market and its expected revenue growth make it the better bet for investors looking to capitalize on the AI chip market's growth.

FAQS:

Q: Which company is the leading player in the AI GPU market?

A: Nvidia is the leading player in the AI GPU market, with an estimated 94% market share.

Q: How much is Nvidia's data center revenue expected to grow in 2025?

A: Nvidia's data center revenue is expected to generate $200 billion in revenue in 2025, according to KeyBanc analyst John Vinh.

Q: What is AMD's expected data center GPU revenue in 2024?

A: AMD's data center GPU revenue is expected to hit at least $4.5 billion in 2024.

Q: How much is the AI PC market expected to grow annually through 2028?

A: The AI PC market is expected to clock an annual growth rate of 44% through 2028, according to Canalys.

Q: Which company is expected to grow at a faster pace in the next five years?

A: Nvidia's earnings are forecast to increase at a compound annual growth rate of 52% for the next five years, higher than the 33% growth rate that AMD is forecast to deliver over the same period.

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