Advanced Micro Devices (AMD) reported its third-quarter 2024 earnings on Tuesday, with CEO Lisa Su claiming the company has “closed a good part of” the gap with AI chip rival Nvidia. Despite this optimistic assessment, AMD continues to trail significantly behind Nvidia in the critical GPU market for AI training, where Nvidia commands over 80% market share.
AMD’s Q3 revenue increased 18% year-over-year, driven primarily by strong performance in its data-center segment, including sales of its Instinct GPU and EPYC CPU products. However, the company’s stock price dropped as much as 10% on Wednesday following the earnings call, as analysts expressed concerns about delays in AMD’s GPU product roadmap.
The company announced its new-generation MI325X accelerator chip would begin production in late 2024 and become widely available in early 2025. AMD also plans to release its MI350 chip next year to compete directly with Nvidia’s highly anticipated Blackwell chip, which is expected to ship in Q4 2024. Bank of America Securities analyst Vivek Arya characterized AMD’s chips as “kind of one year behind the industry leader,” questioning whether AMD could gain market share until closing this technology gap.
CEO Lisa Su defended AMD’s competitive position, stating that the MI325 would “compete very well” with Nvidia’s H200, while the MI350 series would match up against Blackwell. She emphasized that AMD holds advantages in data-center retrofitting and that building market share takes time, requiring years to design, test, and establish customer trust in higher-capacity chips.
Despite the late start, analysts acknowledge AMD’s progress in the AI chip market. Bank of America’s Arya noted that AMD has achieved an “enviable” climb from virtually zero to approximately 5% market share, even as Nvidia maintains its 80-85% dominance. Morgan Stanley raised its AMD growth estimates to $8 billion for the next year, though analysts noted that actual customer usage remains “relatively small” despite commitments from major clients including Microsoft, Meta, and Google. The underlying AI market growth provides AMD with significant opportunities to participate in the boom, even if its market share percentage remains stable.
Key Quotes
I think MI325 is a great product. It’s going to compete very well with H200, and the MI350 series will compete very well with Blackwell.
CEO Lisa Su expressed confidence in AMD’s upcoming chip lineup during the earnings call, directly positioning her company’s products against Nvidia’s current and next-generation offerings in the AI accelerator market.
We had an extremely good product even back in the ROM days. But it does take time to ensure that there is trust built, there is familiarity with the product.
Su explained why AMD’s market share growth has been gradual despite having competitive technology, emphasizing that customer adoption in the enterprise chip market requires years of relationship-building and proven reliability.
As much as we still believe NVDA will be hard to shake from its 80-85% AI share, AMD still has done an enviable job from virtually zero to ~5% market share.
Bank of America Securities analyst Vivek Arya acknowledged AMD’s progress while recognizing Nvidia’s continued dominance, suggesting that even maintaining this small share in a rapidly growing market represents significant opportunity.
Our checks continue to show several customers that are committed to using AMD architecture, but actual usage still seems relatively small.
Morgan Stanley equity analysts noted a gap between customer commitments and actual deployment, indicating that while major tech companies are diversifying their AI chip suppliers, Nvidia remains the primary choice for production workloads.
Our Take
AMD’s earnings reveal the harsh realities of competing in the AI chip arms race. While a 5% market share might seem modest, it represents a remarkable achievement against Nvidia’s entrenched position and superior software ecosystem. The real story here isn’t just about chip performance—it’s about the multi-year customer relationships and software optimization that create switching costs. Su’s emphasis on “trust” and “familiarity” acknowledges that raw hardware specs don’t guarantee adoption. The 10% stock drop despite meeting expectations suggests investors are impatient for faster progress, but semiconductor competition is measured in product generations, not quarters. The commitment from hyperscalers like Microsoft and Meta to AMD provides a crucial foothold, even if actual usage lags. As AI infrastructure spending continues to surge, AMD’s position—however small—could translate into tens of billions in revenue over the next decade.
Why This Matters
This earnings report highlights the intense competition in the AI chip market, which has become one of the most strategically important sectors in technology. AMD’s ability to capture even 5% of this market represents billions in revenue and validates that alternatives to Nvidia’s dominant position are emerging. For businesses investing heavily in AI infrastructure, AMD’s progress means more competitive pricing and supply chain diversification options.
The one-year product lag identified by analysts reveals the challenges of competing in cutting-edge semiconductor development, where design cycles span years and customer trust takes time to establish. This dynamic affects the entire AI industry, as GPU availability and pricing directly impact AI research, development, and deployment timelines. AMD’s gradual market share gains suggest the AI chip market may slowly evolve toward a more competitive landscape, potentially reducing supply constraints and costs that have hampered AI adoption. The commitment from major tech companies like Microsoft, Meta, and Google to AMD architecture signals a strategic desire to avoid single-vendor dependence in this critical technology area.
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Source: https://www.businessinsider.com/amd-earnings-q3-2024-ceo-lisa-su-nvidia-ai-chips-2024-10