AMD Targets $2 bn in AI Chip Sales by 2024, Amidst Nvidia’s Dominance

Chip designer Advanced Micro Devices (AMD) is setting its sights on the lucrative artificial intelligence (AI) market, aiming to compete head-to-head with industry giant Nvidia.
AMD chipset businessThe company revealed on Tuesday that it is forecasting $2 billion in sales from its upcoming AI chip, the MI300X, by 2024. This bold move represents AMD’s determined bid to challenge Nvidia’s dominance in the data center AI chip sector, where powerful chips are used to develop technologies like language models, such as ChatGPT.

Santa Clara, California-based AMD said its current-quarter revenue forecast stands at around $6.1 billion, with a margin of error of $300 million. This represents year-over-year growth of 9 percent and sequential growth of 5 percent.

AMD in its earnings report said it is also anticipating adjusted gross margins of 51.5 percent. However, analysts have noted that AMD is currently facing challenges in the form of a weak gaming market and declining demand from certain industries for its programmable chips.

The MI300X chip has garnered significant attention, with AMD CEO Lisa Su announcing that “multiple, large hyperscale customers” have already committed to using this promising technology.

The company has increased its revenue expectations for the fourth quarter, with the MI300 chip projected to bring in $400 million, up from the previous forecast of $300 million given in August. This growth has fueled AMD’s ambitious 2024 sales forecast of $2 billion for the MI300 chip.

Nevertheless, AMD faces certain headwinds. Intel recently announced that it expects a decline in demand from the data center segment, a slowdown that is impacting AMD’s Xilinx business, known for its high-margin programmable chips.

Furthermore, the expansion of U.S. sanctions on chip exports to China means that AMD will need to secure licenses to sell its most advanced AI chips to the Chinese market. These chips are expected to launch in the fourth quarter of this year.

Capital spending reductions by key customer Meta Platforms could also pose challenges for AMD. Meta Platforms, which has several social media platforms, recently revealed that its Capital expenditures were $6.76 billion for the third quarter of 2023.

Meta Platforms’ capital expenditures will be $27-29 billion in 2023, updated from prior estimate of $27-30 billion. Meta is targeting full-year 2024 capital expenditures of $30-35 billion, with growth driven by investments in servers, including both non-articial intelligence (AI) and AI hardware, and data centers.

In the third quarter, AMD reported adjusted revenue of $5.8 billion, marking a 4 percent increase. Adjusted profits amounted to 70 cents per share.

A segment summary of the quarterly results indicates that while revenue in the data center segment remained flat at $1.6 billion, client segment revenue, catering to the PC market, saw a significant 42 percent increase, reaching $1.5 billion. The embedded segment, housing programmable chips, experienced a 5 percent decrease, down to $1.2 billion, and gaming revenue declined 8 percent to $1.5 billion.

These developments showcase AMD’s strategic positioning in a competitive market, emphasizing its commitment to AI technology and its determination to overcome current challenges.

Meanwhile, Wall Street Journal reports that Nvidia, the artificial intelligence (AI) giant, may be forced to cancel up to $5 billion worth of advanced chip orders to China in compliance with new U.S. government restrictions.

Nvidia was notified last week that AI chip orders scheduled for delivery next year to major technology companies, including Alibaba Group, TikTok owner-ByteDance and Baidu, are subject to the latest export restrictions announced by the U.S. Commerce Department, news report said.