This is an AI Arms Race, Says Dan Ives

Dan Ives Global Head of Technology Research at Wedbush Securities joins to discuss the latest tech news with Paul Sweeney and Scarlet Fu.

Advanced Micro Devices Inc. shares soared as much as 11% after the chipmaker predicted accelerating sales growth over the next five years, driven by strong demand for its data center products.

Annual revenue growth will average more than 35% over the next three to five years, Chief Executive Officer Lisa Su said Tuesday at a company event in New York. AMD’s AI data center revenue will increase by an average of 80% over the same period, she said.

AMD, Nvidia Corp.’s nearest rival in AI chips, has been facing increasing concern that spending on artificial intelligence computing can’t continue at the current elevated levels. The chipmaker’s stock has about doubled this year, helped by agreements signed with companies including OpenAI and Oracle Corp. The biggest owners of data center are increasing their budgets for new gear as they see “real value in their business” for AI, Su told her audience.

“The rate and pace of change in AI is certainly beyond anything that I’ve seen,” Su said.

The biggest data center owners last year were predicting a slowing of the build-out, but now Su said they’re telling her they’re going to accelerate the pace of investment. “It’s not going to level off,” she said.

The total AI chip market, including accelerators, processors and networking products, will reach $1 trillion by 2030, Su said.

AMD’s leader was asked about concerns that OpenAI might not be able to fund the huge amount of spending that it’s laid out. She stressed that AMD’s deal with the ChatGPT developer is structured in a very disciplined way. While the startup is the most aggressive forecaster of future AI computing requirements, if projections for AI user growth and revenue pan out, there will be plenty of funding available, Su said.

“I wouldn’t bet against them,” she said.

AMD shares rose as high as $263.51 in New York, marking the biggest intraday rally in about a month.

Last week, AMD delivered a strong revenue forecast for the current quarter that surpassed what analysts had predicted. But its outlook for sales growth of more than 20% got a lukewarm reception from shareholders because much of that increase is coming from PC and server computer processors.

For AMD’s long-range forecast, analysts, on average, estimated sales growth of 32% in the current year followed by expansions of 31% in 2026 and 39% in 2027, according to data compiled by Bloomberg. Analysts projected the company’s annual growth would slow later in the decade to 20% in 2028 and 12% in the following year.

Analysts estimate AMD’s adjusted profit at $9.88 a share in 2027.

AMD has long since shed its label as an also-ran in the industry and is taking market share from larger rival Intel Corp. But its performance is now held to a higher standard. While the company has generated billions of dollars of new revenue from the AI accelerator market – where Intel has yet to field a viable product – Nvidia has booked tens of billions of sales in what’s become the most lucrative part of the chip industry.

AMD’s CEO told analysts on a conference call last week that the AI business will generate “tens of billions” of dollars in annual revenue by 2027. The company’s PC chip business, meanwhile, should grow faster than the overall market, she said then.

The chipmaker’s recent agreements with OpenAI, Oracle and the US Department of Energy reflect increased interest in its MI series of AI accelerators. Those products, which go head-to-head with chips from Nvidia, are used in data centers to create and run AI services.

AMD is the second-biggest provider of graphics chips, which form the basis for the AI accelerators that run in data centers. Its microprocessors, meanwhile, compete directly with Intel products in PCs and servers.

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