Summary
- Advanced Micro Devices, Inc. is facing challenges in the GPU market, particularly with data center GPU offerings.
- Large cloud players are investing in custom silicon, posing a threat to AMD’s market share.
- AMD’s valuation, profitability, and demand outlook are concerning, making it a sell recommendation compared to competitors.
Introduction
Advanced Micro Devices, Inc. (NASDAQ:AMD) is the world’s number two player in both the CPU and GPU, behind Intel Corporation (INTC) and NVIDIA Corporation (NVDA) respectively. The stock has been a high-flier over the past number of years on AI excitement. However, the market appears to be getting concerned about the lofty valuation amid signs the firm’s data center GPU offering may not be as hot as initially expected.
The firm sits in an awkward position as the distant number two player in the GPU accelerator market. The stock had previously outperformed in hopes it would pick up market share as large cloud players sought to diversify away from Nvidia to reduce reliance on a single vendor. I, however, see AMD as significantly threatened, by the move by the cloud hyperscale players to develop their own custom chips in-house.
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