AMD ( NASDAQ:AMD ) is set to hold its “Advancing AI” event this week, where analysts expect to hear about new product announcements that could boost sales and boost the chipmaker’s stock price.
Meanwhile, analysts at Lynx Equity Strategies believe this will be “an event that fades the news.”
“AMD stock had a modest rise last week on investor expectations for clarity on the MI325X and its next products. We believe investors are likely to be disappointed,” they stressed.
The Lynx team is cautious about AMD’s ability to catch up to Nvidia ( NASDAQ:NVDA ) , noting that the latter continues to dominate the market. Despite AMD’s ambitious claims at the launch of the MI300X almost a year ago, it has made little progress in challenging NVIDIA’s stronghold.
“We don’t expect the MI325X to significantly change the narrative,” the analysts said, suggesting that AMD is likely to “remain a distant second” to its rival.
While AMD is expected to highlight developments in data center processors and AI computing, Lynx believes investor attention will remain firmly on the MI lineup. Analysts warn that unless AMD can show a clear driver of market share growth, the stock could potentially repeat the year’s lows.
Following AMD’s presentation at Computex a few months ago, there was some optimism surrounding the company’s next-generation data center GPUs, especially given the higher HBM density in AMD’s MI325X-288GB compared to NVIDIA’s 141GB in the H200.
However, Lynx notes that customer traction was weak in the months that followed. Although AMD management boasts of superior benchmark results compared to NVIDIA’s Hopper series, the company’s analysts are not convinced, noting that “while running real-world workloads, we believe the MI300X continues to fall short of the H100 of NVDA”.
“We don’t expect the MI325X to significantly change the narrative. Superior HBM density is just one of the factors at work—the software stack, backplane networking and power consumption are just as important,” the analysts continued.
They believe AMD has high expectations for the MI325X and is expanding its chip-on-wafer-on-substrate (CoWoS) capacity in anticipation of future demand. In particular, Broadcom Inc’s ( NASDAQ:AVGO ) strong guidance for its ethernet connectivity business in GPU-based AI data centers next year could indicate growing demand from AMD’s AI servers. Microsoft (NASDAQ:MSFT) also appears to be a key customer, although Lynx remains uncertain about “who are the players moving the needle.”
Adding to the uncertainty, Meta Platforms (NASDAQ:META), which backed AMD’s MI300X launch last year, may have seen its commitment to AMD diminish recently.
“We believe that META may have solidified its plans for internally developed silicon as a future alternative to NVDA. And Amazon/AWS as well, we doubt AMD is considered a viable alternative to NVDA,” explains Lynx.
The company also cites Oracle (NYSE:ORCL) as a potential customer, along with interest from enterprises, but cautions that the MI series, along with its software stack, may not be the plug-and-play solution it has promoted the AMD.
“Other than MSFT, we don’t think end customers are likely to spend resources to help bridge the gap as it’s unclear what the return will be,” the analysts said.
“We expect the stock to trade lower after today’s event and likely retest the year’s lows.”
As for potential surprises at the event, Lynx suggests that while Amazon (NASDAQ:AMZN) or Google (NASDAQ:GOOGL) could be announced as new customers, that would likely be limited to externally facing cloud cases.
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Reference;
Karaahmetovic, V. (2024) AMD’s AI product event likely to be ‘a fade-the-news event’ says analyst By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/amds-ai-product-event-likely-to-be-a-fadethenews-event-says-analyst-3657633 (Accessed: 10 October 2024).
