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The latest artificial intelligence chips from Advanced Micro Devices may showcase the company’s AI capabilities, but the chipmaker faces obstacles as it races to catch its competition, some Wall Street analysts say. “We commend AMD’s efforts as they bear fruit,” wrote Oppenheimer analyst Rick Schafer in a Wednesday note, maintaining his perform rating. “We continue to view NVDA as the dominant accelerator franchise and remain sidelined as AMD’s AI vision proves out.” Shares of the chipmaker popped nearly 10% Thursday, a day after the company launched its new AI chips as it fights to gain share of the growing pie. AMD also said it expects AI growth to boost its total addressable market to $400 billion in 2027 and highlighted that Meta Platforms and Microsoft already plan to use its Instinct MI300X chip. AMD YTD mountain AMD shares year to date AMD’s product comes as a direct challenge to AI heavyweight Nvidia , whose shares have more than tripled in 2023 on AI bets. Nvidia has become the go-to chipmaker for its advanced graphics processing units underpinning many large language models. But a shortage in chips as companies scramble to integrate AI technologies into their tools has left many on the hunt for comparable alternatives. A long road ahead Many Wall Street analysts viewed AMD’s chip launch event as a positive for the company and its long-term AI prospects. As of Thursday, about 70% of analysts hold a buy or overweight rating, per FactSet, with the average price target implying about 4% upside. Even so, some analysts retained neutral ratings and a cautious near-term outlook as they await more clarity on the AI products. JPMorgan’s Harlan Sur said AMD offers one of “most comprehensive compute product portfolios” addressing the growing AI profile. However, the analyst retained his neutral rating, saying shares are “fully valued” and that the company will need to up spending to keep up with the market. Deutsche Bank’s Ross Seymore also said AMD looks well-situated to take advantage of AI growth, but he maintained his hold rating, citing risk/reward concerns and cyclical headwinds. AMD on Wednesday said its chips offer better inference performance compared with Nvidia’s products. But some analysts threw caution at that notion, noting that Nvidia is slated to soon roll out an updated version of its H100 chip. Morgan Stanley’s Joseph Moore noted the difficulty in assessing those claims, although the higher bandwidth memory may be an advantage for AMD at least until Nvidia rolls out its newest iteration. He added that discussions with customers have also indicated that “AMD is supplying cost-effective inference capability, while lacking the software and ecosystem support that NVIDIA can provide.” Bernstein’s Stacy Rasgon echoed similar concerns about comparing AMD’s higher bandwidth chip to that of Nvidia, saying that the company’s launch event for the new chip provided “no color on any future roadmap offerings from AMD.” In turn, this “makes it difficult to judge how the company’s long-term competitiveness might evolve,” Rasgon wrote in a Thursday report. While the latest updates should help AMD attain its $2 billion accelerator sales goal in 2024, the company needs to make extensive progress in the software space to catch up to competitors, according to Bank of America’s Vivek Arya. The company’s “implied accelerator market share remains small at < 3% vs. NVDA’s ~80% in CY24E and believe much of the GPU upside has been priced in at current valuation,” he said. — CNBC’s Michael Bloom contributed reporting.
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