AI has been the big conversation piece on Wall Street since ChatGPT became a thing towards the end of 2022. The stock market’s gains have been built on the theme with chipmakers claiming some of the biggest spoils.
Leading the charge in the early days of GenAI, Nvidia (NASDAQ:NVDA) has taken pole position, as it has virtually cornered the AI chip market with its cream of the crop offerings. Investors have reacted in kind, sending shares on one long gains binge over the past 18 months.
While Nvidia currently commands the segment with its undisputed leadership, the market is expansive and evolving, offering room for other chip companies to thrive. Possibly best positioned amongst them to do so is Advanced Micro Devices (NASDAQ:AMD), often considered Nvidia’s little sibling.
Top investor Yiannis Zourmpanos concedes Nvidia remains the benchmark in the AI game, but notes that AMD has plenty going for it as well.
“AMD’s chipset-based design strategy contrasts sharply with Nvidia’s monolithic approach, potentially reshaping the GPU market by offering cost-effective, scalable solutions,” Zourmpanos explained. “This innovation, coupled with strategic moves into AI and large language models, or LLMs, positions AMD to challenge Nvidia’s dominance despite the latter’s strong ecosystem and performance edge.”
The company is also well-positioned to make an impact with the MI300X AI GPU, which is based on a novel architecture that results in substantial performance improvements when contrasted with Nvidia’s H100, and it is also significantly cheaper. Furthermore, AMD has secured Microsoft and Meta Platforms as clients for the MI300X AI chip, marking a significant shift. These two tech giants were previously the primary buyers of H100 GPUs, a factor that solidified Nvidia’s dominance in the segment. Additionally, ChatGPT maker and AI pioneer OpenAI has expressed its intention to use it too.
Thus, says Zourmpanos, investors should note of the opportunity presented here. “AMD is well positioned to take on Nvidia and eat a significant market share, having unveiled the MI300X, a much more powerful and cost-effective AI GPU. Given the ever-growing demand for chips to power AI-generative services and hardware, there is plenty of room for growth, which positions AMD to offer investors bigger gains over the long term,” the 5-star investor summed up.
To this end, Zourmpanos has upgraded his AMD rating from Buy to Strong Buy while his $275 price target factors in growth of 62% from current levels. (To watch Zourmpanos’ track record, click here)
While Wall Street analysts are somewhat more conservative, their average price target of $201.26 still implies returns of ~19% in the coming year. Rating-wise, most analysts also back AMD’s prospects; based on 28 Buy recommendations versus 6 Holds, the analyst consensus rates the stock as a Strong Buy. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
