potential disappointments in AMD's 2025 sales for their artificial intelligence processors
AMD, currently holding the second spot in the AI accelerator market, is trailing behind industry leader Nvidia. While Nvidia rakes in an impressive $30 billion per quarter in its data center segment, AMD anticipates generating around $5 billion from AI accelerator sales by 2024.
With the AI accelerator market's continued growth and AMD's minimal market share, the company holds promising prospects for rapid expansion in its AI business. However, a Wall Street analyst's forecast for 2025 may paint a less optimistic picture for AMD.
The Looming Challenge
Analysts from Wolfe Research lowered AMD's stock to an "equivocal hold" status and removed their price target, citing concerns about data center GPU growth. The analyst's pessimism stemmed from original design manufacturers' build plans.
The analyst predicts AMD's data center GPU revenue to range between $1.5 billion and $2 billion in the fourth quarter of 2024. For 2025, the forecast drops to a mere $7 billion, significantly lower than the $10 billion broadly expected by the industry. This forecast suggests that AMD's data center GPU revenue will see little quarterly growth in 2025.
Analyst predictions can be influenced by a multitude of factors, so it's wise to approach such forecasts with skepticism. AMD's AI accelerators are enjoying a surge in popularity, and major players like Oracle are switching to AMD's MI300X GPUs for their cloud data centers. Vultr, a smaller cloud provider, also opts for the same AMD GPU for its AI services.
Despite AMD's market-winning hardware, the existing Nvidia software ecosystem, which features the CUDA proprietary software layer, offers a convenient and widely-used solution for accelerated computing tasks. This software advantage can make the transition to using AMD GPUs more challenging for developers building out AI clusters.
AMD's Challenges Uphill
Competitors like Intel also face hurdles when attempting to break into the AI accelerator market. Intel's Gaudi AI chips incorporate a distinct architecture that may serve as an additional hindrance. AMD, however, has shown more promise in this area than Intel, although it still lags behind Nvidia.
AMD anticipates introducing two new AI chips in 2025 to boost their sales. The MI325X, set to be available from system manufacturers in Q1, carries the same architecture as the MI300X. The Instinct MI350 family, featuring significant performance improvements, is expected to launch later in 2025. This next-generation family aims to deliver up to 35 times the AI inference performance compared to its MI300 counterpart.
Despite an aggressive product launch pace, AMD remains in direct competition with Nvidia, continuing to battle the software disadvantage. Any discrepancy between expectations and actual AI chip sales could result in AMD's stock taking a dive.
To mitigate financial losses and boost investing opportunities, AMD may consider strengthening its software ecosystem to compete more effectively with Nvidia's CUDA proprietary software layer. With analyst predictions suggesting a potential revenue of $7 billion for AMD's data center GPU in 2025, it's crucial for the company to focus on maximizing these earnings and expanding its market share.
The finance department within AMD should closely monitor the impact of analyst predictions and market trends on its future investing strategies, ensuring smart financial decisions to maximize profits and grow the business.
