Why AMD Could Be the Top AI Investment Over the Next Half-Decade

NNicholas November 7, 2023 7:02 AM

As AI continues its ascent, investors look for promising stocks to capitalize on this trend. While Nvidia has been a major player, AMD is poised to make significant strides in the AI market over the next five years. Here's why.

Generative AI: A lucrative investment

Artificial Intelligence isn't going anywhere any time soon. Businesses are recognizing the potential of generative AI, a form of AI that can create new content, to boost productivity and widen their profit margins. This isn't a trend that's confined to 2023; it's a future-oriented approach that smart businesses are investing in right now. So, while the AI market has already seen some significant growth, notably with the 218% rally on Nvidia's stock, there's still plenty of room for new players and profits in the coming years.

AMD's challenge to Nvidia's AI reign

Nvidia has long been the leader in AI computing chips, but AMD is ready to shake things up. With a history of successfully challenging established market leaders and profitably gaining significant market share, AMD is well-positioned to make a big splash in the AI market. Its most powerful Instinct-branded MI300 AI processing chip is set to ramp up sales this quarter and could become a formidable adversary to Nvidia's widely popular H100. As the AI accelerators market continues to grow, so does AMD's potential to seize a substantial chunk of it.

AMD isn't just banking on hardware to lead the charge in the AI market. It's also investing heavily in AI software, having recently acquired two AI-software companies. This move, along with the news that AI startup Lamini has been running large language models on AMD hardware for a year, could spur wider adoption of AMD's AI offerings. With over 5,000 potential customers reportedly on Lamini's wait list, AMD could be on the brink of a significant breakthrough.

AMD's potential stock surge

AMD's fortunes aren't tied solely to the AI market. In fact, the company's traditional markets—personal computing chips, data center, and gaming—are showing signs of recovery after a cyclical slowdown in 2022. This resurgence, combined with the growth of AMD's AI chip and software business, could catapult the company's stock past its all-time highs over the next five years. With analysts projecting a 20.8% surge in AMD's revenue during the next year, and an attractive forward price-to-earnings multiple under 30, AMD could very well be the next big AI stock.

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