Before entering this article, I recommend that readers who are not very familiar with the business of AMD (ticker: AMD) please refer to my previous post “How AMD makes money? A rare case of turning defeat into victory“.
Company status
The long-term in second position
Regardless of whether it is in the fields of x86 personal desktop computers, notebook computers, independent display chips, GPUs, and artificial intelligence chips, which are the major sources of business revenue for major companies, Supermicro’s market share is the second largest in ten thousand years. Behind Intel (ticker: INTC), which ranks first in the x86 personal desktop computer and notebook computer market, or independent display chip GPU and artificial intelligence chip Nvidia (ticker: NVDA).
Leader in specific areas
In terms of FPGAs and high-speed computing embedded systems, these two secondary revenue areas, AMD successfully acquired Xilinx, which holds the largest market share in FPGAs, overtaking Intel’s Altera market share.
In terms of high-speed computing embedded systems, in addition to Nintendo using Nvidia’s hardware platform, Microsoft’s XBox and Sony’s PlayStation are both AMD’s customers. Even before Tesla (ticker: TSLA) released its own HW chip platform, I have also used AMD’s hardware platform.
On artificial intelligence chips
MI300
Everything is related to artificial intelligence chips. AMD revealed the MI300 series of artificial intelligence chip families in 2023. The company stated in early November 2023 that the MI300 chip will begin shipping in the next few weeks; the chip will compete directly with Nvidia’s products in the field of artificial intelligence. AMD believes that it can rely on this chip to become the most powerful challenger to break Nvidia’s 80% monopoly on the artificial intelligence data center chip market.
The MI300 series includes two new artificial intelligence data center chips: the MI300X focuses on generative artificial intelligence applications, and the other MI300A is mainly used in supercomputers.
The new ultra-microchip has more than 150 billion transistors and has 2.4 times the memory of the current market leader, the Nvidia H100. It also has 1.6 times the memory bandwidth, which can further effectively improve the overall system performance.
AMD saw an opportunity: The large language models used by artificial intelligence chatbots like OpenAI’s ChatGPT require large amounts of computer memory, and this is where AMD believes it has an advantage.
The CEO said the new chip is comparable to Nvidia’s H100 in its ability to train artificial intelligence software and performs better in inference.
The most important point is: the average selling price of Huida’s H100 is four times that of AMD’s competing product MI300X!
How big is the market?
Supermicro said that the chip should bring in revenue of US$400 million in the fourth quarter of 2023 (this will be confirmed in the fourth quarter of 2023), and is expected to reach US$1 billion as soon as possible. Revenue from sales of Ultramicro products.
In addition, AMD estimated in early December 2023 that the market value of its data center artificial intelligence processors in 2024 would be US$45 billion; the total potential market forecast was higher than the US$30 billion forecast by AMD in June.
The data center AI chip market is now expected to grow to approximately $400 billion by 2027; this figure is more than double the forecast given by AMD in August, indicating that expectations for AI hardware are growing Change rapidly.
Endorsement from very large customers
The MI300 chip has received strong early orders, including from the world’s most demanding ultra-large cloud computing customers: Microsoft (ticker: MSFT), Oracle (ticker: ORCL), Alphabet (tickers: GOOGL and GOOG) , Amazon (ticker: AMZN), Meta (ticker: META), etc. “We have a lot of supply capacity and we have a lot of customers, well over $2 billion,” the CEO said at a news conference.
2023 Q4 Results
Performance numbers
The following are the company’s results for the fourth quarter of 2023:
- Non-GAAP earnings per share were $0.77
- Quarterly revenue of $6.2B (+10.7% year-over-year), beating expectations by $60 million
Performance by segment
- The data center segment is US$2.3 billion, an annual increase of 38%; mainly driven by Instinct GPU and fourth-generation EPYC CPU, of which artificial intelligence chip revenue exceeded US$400 million.
- Client Division: US$1.5 billion, an annual increase of 62%, mainly driven by the growth of Ryzen 7000 series CPUs
- The gaming segment was $1.4 billion, down 17% year-on-year, with a decrease in semi-customized revenue partially offset by an increase in Radeon GPUs.
- The embedded division was US$1.1 billion, a year-on-year decrease of 24%, mainly due to customer inventory levels.
Highlights
- During the meeting, the business outlook for the first quarter of 2024 was lower than expected, causing the stock price to plummet by nearly 7% after hours.
- Raised its forecast for sales prospects for artificial intelligence chips; the optimistic outlook for artificial intelligence chips helped offset the negative impact of AMD’s lower-than-expected revenue outlook.
- “Demand for our high-performance data center portfolio continues to accelerate, positioning us well to Strong annual growth at an incredibly exciting time as artificial intelligence reshapes nearly every part of the computing market.”, CEO said
- In October 2023, the CEO publicly stated that AMD’s newly released artificial intelligence chip MI 300 series products would have sales of US$2 billion in 2024.
AMD’s price only fell 2.54% on the next day.
Conclusion
From the end of October 2023 to the end of January 2024, AMD’s stock price has performed exceptionally, rising by 90%, mainly due to a combination of the following reasons:
- The market has strong demand for artificial intelligence chips, and AMD’s newly released artificial intelligence chip MI 300 series products are regarded as another option to break Nvidia’s monopoly in this area, and have won immediate purchase order from several of the largest customers in the market.
- In October 2023, the CEO publicly stated that AMD’s newly released artificial intelligence chip MI 300 series products would have sales of US$2 billion in 2024.
Secondary factors include the following:
- AMD successfully acquired Xilinx, which holds the largest market share in FPGAs, significantly strengthening AMD’s strong competitiveness in the data center field.
- Although Intel’s stock price has soared by nearly 90% in 2023, it is still lackluster in terms of processes, products, and market share, at least so far. This allows AMD to continue to conquer the city.
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