AMD experienced a significant surge in its stock, rising 9.9% to close at $128.37, marking its best day since May and reaching the highest close since June. The surge followed the launch of new artificial intelligence (AI) chips that will compete with Nvidia in the AI applications space. AMD’s CEO, Lisa Su, introduced the Instinct MI300X, a large graphics processor designed for AI-oriented servers, and mentioned commitments from Microsoft and Meta to use the chip. Nvidia has dominated the AI chip market, prompting cloud providers and technology companies to seek alternatives for cost savings and flexibility. The rise in AMD shares suggests investor confidence in the company’s ability to capture a portion of the AI chip market from Nvidia.

However, AMD’s projection of $2 billion in AI GPU sales in 2024 falls below market expectations for Nvidia’s AI revenue. Despite this, AMD’s new high-end chip is set to ship in significant quantities next year. Analysts from Deutsche Bank and Citi believe AMD is well-positioned to capitalize on the expanding AI total addressable market (TAM) and could secure around 10% of the total AI chip market.

Lisa Su mentioned the potential for the AI chip market to reach $400 billion over the next four years, doubling the company’s previous estimate. She emphasized that AMD doesn’t necessarily need to surpass Nvidia to thrive in the AI chip market due to its anticipated substantial size. The positive response from investors and the competitive performance metrics of AMD’s products position the company favorably in the rapidly growing AI TAM.

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