AMD Amps Up Chip War - But Nvidia's Still Leading

The Wall Street Journal marvelled at AMD's 'game-changing deal' this week with OpenAI, calling it 'the culmination of an extraordinary, decade-long turnaround effort, solidifying AMD's status as Nvidia's most legitimate competitor.'

Shortly after taking charge of the company in 2014, [CEO] Su implemented a systematic plan to eat Intel's lunch, which she accomplished by going after Intel's main product lines while it was bogged down by manufacturing problems. Now, Su has set her sights on Nvidia, the $4.5 trillion chips behemoth led by her cousin, Jensen Huang. Some analysts believe that if Su can sign up more big customers for its AI chips, AMD could join the $1 trillion valuation club before too long.

'With this, it's natural to ask: Did AMD just say checkmate to Nvidia?' asks the Motley Fool investment site. But their answer seems to be 'no'...

AMD has increased its push into the AI market over the past few years, launching the AMD Instinct line of accelerators, and in the latest quarter, predicted its MI350 series would drive revenue growth in the second half of the year. Some analysts have said that AMD's innovations position it to compete with Nvidia's Blackwell architecture and chip — released late last year — but Nvidia's commitment to release upgrades on an annual basis could keep it a step ahead when it comes to overall GPU performance and therefore revenue. Big tech companies are looking for the most powerful compute available — and so far, they know they can find that at Nvidia...
[AMD's deal this week] is indeed an interesting operation, ensuring the company a major position in this infrastructure scale-up phase. [Nvidia CEO] Huang has said AI infrastructure spending may reach $4 trillion by the end of the decade, and this represents an enormous opportunity for chip designers such as AMD and Nvidia. So, the OpenAI deal is positive for AMD — but I wouldn't say it's negative for Nvidia. This chip giant signed its own deal with OpenAI last month, and it involves the deployment of 10 gigawatts of Nvidia systems across data centers...

A quick comparison of the two deals: The Nvidia-OpenAI agreement involves more gigawatts, and Nvidia isn't giving up a stake in its business — on top of this, though Nvidia is offering OpenAI funding, this will result in revenue growth as OpenAI returns to Nvidia to order GPUs. This pretty much guarantees that Nvidia will be the chip designer to benefit the most as OpenAI expands — and AMD isn't about to step ahead of the market leader. All of this means that, yes, AMD should score a win thanks to its agreement with OpenAI and this may boost its growth in the market. But the chip designer can't say 'checkmate' to its bigger rival as Nvidia is perfectly positioned to maintain its lead over the long term.

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