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AMD's Latest AI Chip, Product Roadmap to Debut Wednesday

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Chipmaker Advanced Micro Devices Inc. (NASDAQ: AMD) is rolling out the red carpet at 10:00 am PT Wednesday (1:00 pm ET) for the latest iteration of the company’s AI chips. AMD is also going to lay out its product roadmap for future development of its high-powered graphics and accelerated processing chips (GPUs and APUs, respectively).

Since the release of ChatGPT back in October of 2022, AMD’s share price has increased by almost 80%. Shares of Nvidia Corp. (NASDAQ: NVDA), AMD’s market-leading rival in the AI space, have increased by around 270% at the same time. AMD’s market cap of $191.2 billion is about one-sixth of Nvidia’s $1.15 trillion market cap.

What’s on offer from AMD

At the Wednesday event, AMD is launching the next generation of its MI300 accelerator chips, the MI300X GPU and the MI300A APU. AMD CEO Lisa Su has already told investors and analysts that the company expects $2 billion in revenue next year from these new chips. All else equal, that would add about 8.8% to AMD’s projected revenue of $22.7 billion for the 2023 fiscal year.

More important, perhaps, will be AMD’s look into the future of its PC chips and its challenger to Nvidia’s Cuda platform, ROCm. The tech industry likely has more acronyms than the military, but what’s important for investors here is how AMD thinks its open-source platform will add to sales of its Radeon and Ryzen GPUs.

The Radeon GPUs and Ryzen CPUs are PC-centric chips. AMD has been working on expanding its ROCm platform to improve the performance of these two chip families’ AI capabilities. As a result, R&D expenses rose from $2.85 billion in 2021 to $5.0 billion last year and to $5.73 billion in the first three quarters of 2023. Combined with an industry-wide reduction in PC sales, AMD’s operating income fell from $3.65 billion in 2021 to $1.26 billion last year and to a loss of $90 million so far in 2023.

What AMD plans to do

AMD and Intel Corp. (NASDAQ: INTC) have been working on products that would deliver AI capabilities to PCs. Intel has its own AI accelerator chip, dubbed Gaudi, that the company expects to ship in the tens of millions next year.

AMD has already guided sales of its MI300 accelerator chips to sales of $400 million in the fourth quarter and more than $2 billion in 2024. Virtually all of that fourth-quarter growth is forecast to come from its gaming GPU business. The bad news for AMD is that gaming revenue is likely to see year-over-year revenue declines in 2024 and 2025.

Analysts at BofA see gaming revenue falling from 27% of total revenue in 2023 to 22% next year and 18.6% in 2025. PC revenue comprises 20.7% of 2023’s total, 22.8% of 2024’s expected total, and 22.4% of 2025 revenue.

BofA also expects data center GPU sales to rise from $473 million in 2023 to $2.05 billion next year and $2.96 billion in 2026. These sales will be driven by the so-called Instinct family of MI300 accelerators.

At its Wednesday event, AMD is likely to focus on the technical targets the company has set for its GPUs and how those targets translate into winning a share of an AI GPU market estimated to be worth around $53.5 billion this year and around $120 billion by 2027. The total chipset (GPUs and CPUs) market has been forecast to reach more than $300 billion by 2030.

AMD stock closed at $118.38 on Tuesday and traded up about 1.3% at around $120.00 in Wednesday’s premarket session. The stock’s 52-week range is $60.05 to $132.83.

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