It’s undeniable that Nvidia (NASDAQ: NVDA) has been a key player in the AI surge to date. Despite a recent dip, the stock has surged over 600% since the beginning of 2023, adding trillions to its market value. However, past performance doesn’t guarantee future success, and as the AI landscape begins to expand, investors are seeking alternatives to Nvidia, which might find it difficult to recapture its prior highs this year. One chip manufacturer poised to potentially outperform Nvidia in the latter part of the year is Advanced Micro Devices (NASDAQ: AMD). Known primarily for its PC CPUs, AMD is now experiencing swift growth in data center GPUs. Here are several reasons why AMD could surpass Nvidia moving forward.
1. **Intel’s Struggles Present an Opportunity**: AMD’s primary competitor in the PC market is Intel (NASDAQ: INTC), a company that has long dominated the CPU sector but is now facing significant hurdles. Intel has just announced a major restructuring plan involving layoffs of at least 15% of its workforce by the end of 2025, aimed at cutting $10 billion in costs. The company also reported disappointing earnings for the second quarter, provided weak future guidance, and suspended its dividend. This situation paints a picture of a company in turmoil, despite CEO Pat Gelsinger having three years to initiate a turnaround. Following this news, Intel’s stock fell sharply, potentially paving the way for AMD to capture more market share. The upcoming competition will likely revolve around the AI PC chip market, where AMD seems to have a competitive edge. AMD CEO Lisa Su has indicated that feedback on its new AI PC offerings, such as the Zen 5 platform, is “very positive,” and she’s optimistic about growth prospects in the PC market going into 2025. While Intel is hopeful about its Lunar Lake AI PC chip, it has acknowledged that its reliance on outsourced components might hinder margins, implying it may not be the breakthrough Intel urgently needs. Recently, AMD has demonstrated stronger performance in the client segment, with second-quarter revenue soaring by 49% to reach $1.5 billion, while Intel had only a 9% increase in this area, totaling $7.4 billion. Expectations are that AMD will continue to gain market share from Intel in this vast sector.
2. **Surge in Data Center Revenue**: AMD’s Mi300 data center GPU is now available and quickly gaining traction. In the second quarter, data center revenue skyrocketed by 115%, reaching $2.8 billion, which accounts for nearly half of the company’s total revenue. For the first time, Mi300 surpassed $1 billion in quarterly revenue, and its user base is expanding, especially with Microsoft becoming the first cloud infrastructure to offer general availability of the Instinct Mi300X. Major server manufacturers like Dell and Super Micro Computer are also adopting AMD’s Instinct platforms. Data center revenue typically offers higher margins compared to other areas, which should help boost AMD’s profits in the coming quarters, especially as the company anticipates ongoing robust growth in this sector. Additionally, AMD recently acquired Silo AI, the largest private AI lab in Europe, which will bolster its generative AI technologies, including inference and training, and large language model development.
3. **Nvidia’s Blackwell Delay Opens Doors for AMD**: Nvidia has recently discovered a design flaw in its new Blackwell platform, resulting in a three-month delay for new chips. With an ongoing shortage of data center GPUs, this development could provide AMD with the chance to capture additional market share and may adversely impact Nvidia’s performance in upcoming quarters. While Nvidia’s dominance in the data center GPU market remains intact, the Blackwell delay could hinder its stock performance and affect its reputation. This may represent the most significant setback Nvidia has faced since the start of the AI boom.
**The Outlook for AMD**: With Nvidia currently valued at a market cap of $2.7 trillion and growth likely to decelerate, its potential for upside appears more limited compared to AMD, which could see its market cap rise significantly from its current $220 billion as data center revenue accelerates and it takes additional market share from Intel. Recent downturns in the gaming and embedded sectors are expected to stabilize soon, improving overall results. Even minor improvements could lead to substantial gains for AMD’s bottom line. If it surpasses performance expectations, the stock could experience considerable growth in the coming months.
**Should You Invest $1,000 in Nvidia Today?** Before making any investment in Nvidia, consider this: If you had invested $1,000 when the stock was first recommended on April 15, 2005, your investment would now be worth $752,835!*
