Chipmakers have attracted countless investors over the last year as a boom in artificial intelligence (AI) has sent demand for graphics processing units (GPUs) skyrocketing.
Nvidia has stolen much of the spotlight, with its shares up 200% year over year. However, chip companies at earlier stages in their ventures into AI could have more room to run. This is part of why Advanced Micro Devices (NASDAQ: AMD) is an attractive investment option in the space.
In 2023, Nvidia became the first chipmaker to exceed a market cap of $1 trillion. AMD still has a long way to go before coming anywhere close to that figure, with its market cap at $286 billion. However, that could mean it has far more growth potential over the long term.
AMD is on a promising growth trajectory as it gears up to challenge Nvidia with a new AI GPU and benefits from an improving PC market. The company’s shares are up 123% year over year but are nowhere near hitting their ceiling.
Here’s why AMD’s stock could soar higher in 2024.
Taking its slice out of a $200 billion pie
According to Grand View Research, the AI market reached nearly $200 billion last year and is projected to expand at a compound annual growth rate of 37% through 2030. That trajectory would see the industry surpass $1 trillion before the end of the decade. As a result, it’s not surprising that tech companies like AMD are investing heavily in the budding sector.
AMD unveiled the next installment in its line of MI300 chips last December, debuting its most powerful GPU ever: the MI300X. The new chip is designed to compete with Nvidia’s H100 AI GPU. In fact, AMD is promising that the MI300X is on par with Nvidia’s offerings for training. AMD also claims that it beats the H100 for inference by 10% to 20%.
However, the AI market’s rapid growth rate suggests AMD won’t need to dethrone Nvidia to still see major gains from the industry. Nvidia could retain a leading market share in AI GPUs while AMD carves out a lucrative role in the sector. And its MI300X is already attracting some of tech’s most prominent players.
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