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AMD soars as AI chip sales prediction bodes well for rivalry with Nvidia

People stand at the AMD booth during the Mobile World Congress in Shanghai, China June 28, 2023. REUTERS/Nicoco Chan/File Photo

Advanced Micro Devices (AMD.O) saw an 8% increase in shares on Wednesday on an optimistic estimate for sales of AI chips, which suggested the firm was making headway in its attempt to overtake market leader Nvidia (NVDA.O).

With the share price at $106.41, the confidence surrounding sales of AI chips helped ease concerns about a weak fourth-quarter estimate and set the company up for increases in market value of about $13 billion.

For the first time, CEO Lisa Su forecasted sales for the MI300 chips, which are meant to rival Nvidia’s cutting-edge H100 processors, for 2024 on Tuesday.

She increased the expected revenue for the current quarter of the chip by $100 million and predicted yearly sales of over $2 billion. As a result, the MI300 would become the fastest-ever product in AMD history to reach $1 billion in sales.

“Hitting this milestone is likely a key first step towards proving AMD is the clear second source to Nvidia in the AI accelerator market,” TD Cowen analysts stated.

The CEO said “multiple, large hyperscale customers”—a word used to describe significant IT and cloud computing companies—had committed to using the MI300 processors. Even though AMD’s stock has increased 61% this year through the most recent close, Nvidia’s 184% surge has outpaced AMD’s gains.

Nevertheless, according to LSEG data, at least 18 analysts lowered their price targets for AMD’s stock due to the cautious outlook and weakness in a few of the company’s markets, bringing the consensus estimate down to $130.

Forecasts were lower than our previous projections, and these figures are likely cautious, according to Morningstar analyst Brian Colello.

The demand for programmable chips utilized by the wireless communications, healthcare, and automotive industries has decreased. While the PC industry has been showing signs of revival, these factors have been a hindrance.

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