- AMD is working on powerful AI chips to rival Nvidia.
- According to first estimates, its solutions are 80% as fast as those from Nvidia
- AMD could mount a meaningful challenge to Nvidia’s dominance in the near term
Nvidia(NASDAQ:NVDA) first-quarter earnings report completely changed Wall Street’s perception of the ongoing generative AI revolution. The chipmaker offered a monstrous guidance that topped analyst expectations by over 50%.
Nvidia expects to generate $11 billion in Q2 revenue, crushing the Street expectations for $7.13 billion. For the first quarter, the company reported sales of $7.19 billion, also higher than the expected $6.52 billion. Bernstein analysts wrote in a note,
"In the 15+ years we have been doing this job, we have never seen a guide like the one NVDA just put up with FQ2 outlook that was by all accounts cosmological, and which annihilated expectations,"
Speaking on the earnings call, the company’s CFO, Colette Kress, said that demand for high-end chips "has extended our data center visibility out a few quarters, and we have procured substantially higher supply for the second half of the year."
The Tokenist likened the situation to Nvidia’s “iPhone moment”. Given the unprecedented demand for high-end GPUs, Nvidia stock surged past the $1 trillion market cap threshold, joining an exclusive club of companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and Saudi Aramco (TADAWUL:2222).
Several weeks later and the stock market is trading higher, with the AI-exposed stocks leading the rally. Nvidia is an indisputable market leader at the moment, but several players are looking to close the gap.
Can AMD Unsettle Nvidia’s Dominance?
The first in line to challenge Nvidia’s dominance is Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC), although the latter to a certain extent only given the decade-long underperformance. According to early estimates, Nvidia has an 80%+ share in this lucrative market.
These extremely powerful GPUs, which only Nvidia is building at the moment, are arguably the most sought-after tech product in the world at the moment. According to the first independent third-party assessment, AMD’s high-end chips are about 80% as fast as those from Nvidia.
Hanlin Tang, chief technology officer of MosaicML, an AI startup behind the research, said,
"For most (machine learning) chip companies out there, the software is the Achilles heel of it. Where AMD has done really well is on the software side."
MosaicML’s team of engineers also expects the gap to close as AMD continues to improve its software solutions. AMD’s high-end AI GPU is called “MI250” and is a competitor to Nvidia’s A100.
Both companies are working on new AI chips – AMD’s MI300x and Nvidia’s H100. According to MosaicML, the latter has already been shipped to the first customers and has shown “great promise.” Nvidia’s H100 chips are reportedly being sold for over $40,000, while A100 can be acquired for about $36,000.
On the other hand, AMD’s MI300x will likely have “significantly higher memory capacity and memory bandwidth.”
The result of MosaicML’s testing prompted analysts at Wall Street banking giant Citi to forecast that Nvidia will have “at least 90% share of AI graphics going forward as the scenario is reminiscent of Intel vs. AMD ten years ago when Intel had better performance and ecosystem and over 90% share.”
Citi analysts said in a note to their clients,
“We expect a similar advantage of NVDA’s H100 vs AMD’s MI300, and we continue to expect NVDA to have a substantial advantage in AI performance and share versus AMD going forward given superior speed and ecosystem,”
Northland Capital Markets analyst Gus Richard is more positive on AMD’s chances than his Citi colleagues as he argues the chipmaker could eventually reach a 20% market share in AI chips.
Intel, Marvell, and Who Else?
Some smaller chipmakers, like Marvell (NASDAQ:MRVL), have also benefited from the robust demand for high-end AI chips. The company’s stock surged following the most recent earnings call when the management discussed the demand for high-end chips, saying it expects revenue growth to accelerate in the second half of the year.
Elsewhere, tech titans like Amazon and Alphabet are developing their own chips. AMD shares gained in early May on a report that the chipmaker is working closely with Microsoft on the development of next-gen AI chips.
Microsoft is one of the very few tech titans that hasn’t released a special-purpose AI chip. Bloomberg News reported that the ‘Athena’ project is focused on developing AI chips that will be used to train models and make inferences on new data.
Microsoft said that the powerful AI models require “thousands of Nvidia AI-optimized GPUs linked together in a high-throughput, low-latency network based on NVIDIA Quantum (NASDAQ:QMCO) InfiniBand communications for high-performance computing.”
“The scale of the cloud-computing infrastructure OpenAI needed to train its models was unprecedented – exponentially larger clusters of networked GPUs than anyone in the industry had tried to build.”
Intel is also developing its own AI chips. The fallen chip giant disclosed in March that it plans to ship the first "Falcon Shores" chips to customers in 2025. At the moment, Intel has essentially no market share.
Jeff McVeigh, corporate vice president of Intel's super compute group, said,
"While we aspire to have the best CPU and the best GPU in the market, it was hard to say that one vendor at one time was going to have the best combination of those. If you have discrete offerings, that allows you at the platform level to choose both between the ratio as well as the vendors."
Although both companies are working on new, faster, high-end AI chips. It is unlikely that other competitors, besides AMD, could facilitate a meaningful challenge to Nvidia’s dominance in the near term.
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Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.