Nvidia's Shares Surge by 173% in 2024, Yet Another Promising Semiconductor Stock for Massive Investments as Recommended by Wall Street Experts
Nvidia's Shares Surge by 173% in 2024, Yet Another Promising Semiconductor Stock for Massive Investments as Recommended by Wall Street Experts
Nvidia CEO Jensen Huang believes data center operators will shell out $1 trillion to upgrade their infrastructure within the next five years, driven by AI developer demand. A portion of this money will be allocated towards purchasing GPUs, which are ideal for AI training and inference. As the premier supplier of data center GPUs, Nvidia's shares have surged by 173% in 2024 due to robust sales growth. However, the competition is intensifying, with Advanced Micro Devices (AMD) entering the fray with its own GPUs, which have already attracted several of Nvidia's prominent clients.
The Wall Street Journal monitors 56 analysts who cover AMD's stock, and virtually all of them have assigned it the highest buy rating. Notably, there isn't a single analyst advocating selling AMD stock as of now. Here's why AMD stock may be a lucrative investment, particularly for those who already have positions in Nvidia.
AMD's AI potential extends beyond the data center
Nvidia's H100 flagship GPU entered production in September 2022, enabling the company to capture an estimated 98% market share in 2023 due to a lack of competition. However, AMD's MI300X GPU, which was launched in December, has seen promising adoption in 2024, despite being over a year behind. Notably, top clients including Microsoft, Oracle, and Meta Platforms have adopted the MI300X, which offers better performance and reduced cost of ownership compared to Nvidia's H100.
AMD will begin shipping its new MI325X chips this quarter, offering up to 20% superior AI inference performance compared to Nvidia's H200. Given that AI developers often rent computing capacity from data center operators on a per-minute basis, any speed improvements can result in significant cost savings.
Investors are already keeping an eye on AMD's MI350 series, scheduled for release in the second half of 2025. Based on the CDNA (Compute DNA) 4 architecture, the MI350 will deliver 35 times the performance of CDNA-3-based GPUs like the MI300X. Essentially, AMD's answer to Nvidia's Blackwell-based GPUs, which are currently enjoying "insane" demand (as per Jensen Huang), are now shipping.
AI is gradually migrating from data centers and into personal computers and devices. AMD's new Ryzen AI 300 series of CPUs, NPUs, and GPUs are designed to process AI workloads directly on the device, reducing the need for external data centers and offering a faster user experience. Already, millions of Ryzen AI-enabled PCs have been shipped by leading manufacturers like Lenovo, Microsoft, and HP. Both Lenovo and HP plan to triple the number of Ryzen AI devices they offer by the end of 2024, while AMD anticipates over 100 commercial platforms using the AI chips in 2025 as businesses seek to upgrade to the latest technology.
AMD's AI-related revenue soared in Q3
AMD recently released its Q3 2024 financial results, showing total revenue of $6.8 billion – a record 18% increase from the previous year. The strong growth was primarily driven by AI. AMD's data center revenue reached an all-time high of $3.5 billion, up 122% year over year, thanks to GPUs sales. Initially, AMD had estimated generating $2 billion in data center GPU revenue throughout 2024, but that figure is now expected to surpass $5 billion.
Meanwhile, AMD's client segment – home to the Ryzen AI series of chips – grew in revenue by 29% to $1.9 billion. AMD CEO Lisa Su believes the AI PC cycle is still in its early stages, implying even stronger growth in this segment moving forward.
In contrast, AMD's gaming segment struggled, with revenue declining by 69%. This was due to decreased demand for consoles like Sony's PlayStation 5 and Microsoft's Xbox, as well as anticipation for AMD's next-generation GPUs, set to launch in 2025.
Wall Street is optimistic about AMD stock
AMD has reported non-GAAP earnings of $3.00 per share over the past four quarters. At its current stock price of $148.60, this translates to a price-to-earnings ratio (P/E) of 49.5 – slightly less expensive than Nvidia, which trades at a P/E ratio of 63.1. Furthermore, analysts predict AMD will generate $5.20 in earnings per share in 2025, resulting in a forward P/E ratio of just 28.6. Given the stock market's forward-looking nature, this could explain the overwhelmingly positive view analysts have taken on AMD.
Out of the 56 analysts tracked by The Wall Street Journal, 39 have assigned AMD the highest possible buy rating. The remaining 8 analysts are in the overweight (bullish) category, while 9 recommend holding the stock.
Up top, I pointed out Jensen Huang's projection that data center operators will shell out a mind-blowing $1 trillion on AI infrastructure within the next five years. Now, AMD is estimating that the chips themselves will rake in an impressive $500 billion by 2028, signifying a massive 60% yearly expansion from now until then.
Nvidia might have the lead in reaping the majority of that wealth, but given AMD's significant surge in data center GPU sales and their burgeoning innovation pipeline – highlighted by the impending MI350 – this company could pose a substantial challenge in the coming years.
Eventually, Nvidia's share in the market will inevitably shrink as competitors creep up, making AMD stock a potential life-saving hedge for investors already invested in Nvidia stock. But for freshcomers diving headfirst into the AI chip section, buying AMD stock could serve as an incredible long-term investment opportunity.
The competition in the AI chip market is heating up, with AMD's MI300X GPU seeing promising adoption despite being released after Nvidia's flagship H100. Analysts have assigned AMD stock the highest buy rating, and Wall Street Journal monitors 56 analysts who all advocate buying AMD stock, suggesting it could be a lucrative investment, particularly for those already invested in Nvidia.