Unmissable Decade-Defining Investment: One Artificial Intelligence (AI) Semiconductor Shares to Snatch Up Rapidly and Hold Tight for the Next Ten Years (And It's Not Nvidia)
In the world of semiconductor stocks, the chatter revolves predominantly around one name: Nvidia. With its new Blackwell GPU architecture in the works, it's no surprise that Wall Street maintains a generally bullish stance on the company. Yet, there's a silent contender making waves in the background - Advanced Micro Devices, or AMD, for short.
Now, some may argue that AMD is far behind Nvidia, given the former's smaller size and slower growth. However, upon closer analysis, the picture isn't as cut and dry as it might seem.
Unveiling AMD's Hidden Strengths
The graph below compares revenue and gross profit growth year-over-year for both AMD and Nvidia during the third quarter. While Nvidia takes the lead in both categories, AMD's data center business is experiencing a remarkable resurgence.
| Company | Revenue Growth (YoY %) | Gross Profit Growth (YoY %) || --- | --- | --- || AMD | 18% | 24% || Nvidia | 94% | 95% |
At first glance, Nvidia's soaring sales and profit margins might appear to put AMD at a significant disadvantage. But upon closer examination, the story changes.
AMD
If you break down the results by segment, it becomes clear that AMD's data center business is flourishing, while its gaming and embedded segments are showing signs of decline. Despite this, AMD's data center revenue growth is now approaching that of Nvidia's.
18%
Zooming Out for Full Perspective
24%
According to a report from Jon Peddie Research, Nvidia has a commanding 90% share of AI GPU market, with AMD trailing far behind at just 10%. Initially, this might seem like a daunting challenge for AMD. However, closer examination reveals that much of Nvidia's dominance is due to its long-established presence in the field.
In an effort to challenge Nvidia's monopoly, AMD launched its MI300 series of AI accelerators in December 2023. And look what happened - just one year later, AMD's data center GPU operation had already made significant strides, capturing enough market share to make a dent in Nvidia's gains.
Nvidia
Moreover, AMD has a line of successor GPU architectures scheduled for release throughout the next few years. Combined with its new competitive edge and strategic investments in vertical markets, AMD is poised to become a formidable competitor in the AI GPU space.
94%
AMD's Value Proposition
95%
At its current P/E multiple of 23, AMD is trading at a significantly lower price than it has in over a year. And there's good reason for that.
Many investors have been focusing on AMD's gaming segment, which has been struggling to keep pace with Nvidia. But the data center segment, on the other hand, is experiencing exponential growth.
As the data center business expands, it should begin to offset any sluggishness in the gaming segment. Additionally, as more companies adopt AMD's AI accelerators, the company's market share in the GPU landscape should continue to grow.
In essence, AMD presents a promising investment opportunity with significant growth potential. So, why not consider taking advantage of the current price action and snag some AMD shares while they're still affordable?
Given the current market trends, some investors might be interested in exploring the potential of investing in Advanced Micro Devices ( AMD ). Despite its slower growth compared to Nvidia in the gaming segment, AMD's data center business is showing remarkable resurgence, with its revenue and gross profit growth nearly approaching Nvidia's. This shift in focus towards data centers could make AMD a formidable competitor in the AI GPU space, offering a promising investment opportunity for those seeking growth potential at a lower price compared to its current P/E multiple.
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