Can AMD Make Headway in AI?

The renewed struggles of AMD’s main rival, Intel, have dominated much of the news in the electronics industry recently. While Intel’s dismal second quarter forced the company to lay off a whopping 15,000 workers, or about 15% of its workforce, AMD saw its revenue rise sequentially from the previous quarter and its net earnings more than double, which the company attributed to strong performance in its Data Segment, which includes its AI processors.

“Our AI business continued accelerating and we are well positioned to deliver strong revenue growth in the second half of the year led by demand for Instinct, EPYC and Ryzen processors,” said Lisa Su, Chairperson and CEO of AMD, following the company’s recent financial earnings statement release. “The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business.”

Against the backdrop of a struggling Intel, one wonders if AMD can make significant inroads against its long-time semiconductor rival, particularly in the hotly-contested AI market where Intel has so far not reaped the rewards from.

AMD is serious about enlarging its AI footprint. On Monday, the chipmaker completed the acquisition of Silo AI, considered the largest private AI lab in Europe, in an all-cash transaction valued at $665 million. Silo’s expertise spans diverse markets and they have created state-of-the-art open source multilingual Large Language Models (LLMs) including Poro and Viking on AMD platforms. 

Related:Intel, Nvidia Primed for Heavyweight Battle in AI

During an analysts’ conference call, Su noted the company’s success in deploying its EPYC processors with new customers. Su also expects the company to expand its AI-oriented Instinct chip line, and projects data center GPU revenue to exceed $4.5 billion in 2024.

Responding to a question on the monetization of AI, Su said, “We have to invest. The investment cycle will continue to be strong. There will be multiple solutions, whether custom chips or ASICs. GPUs will be the architecture of choice.”

Analysts Not Impressed

It might not be that easy.

On the site Seeking Alpha, several analysts were underwhelmed in AMD’s perfomance in the fledgling market for AI chips, despite the company’s chest-pounding claims of substantial growth.

Seeking Alpha financial blogger Juxtaposed Ideas said, “AMD has underperformed in the generative AI and x86 CPU races, with it currently relegated to the second place.” He added, “For context, NVDA has guided excellent FQ2'25 revenues of $28B (+7.5% QoQ/ +107.4% YoY), well exceeding the consensus estimates of $26.84B. With that in mind, AMD only reported FQ2'24 Data Center revenues of $2.83B (+21.4% QoQ/ +114.3% YoY), with the absolute number being rather underwhelming despite the robust QoQ/ YoY growths.”

Related:Is Intel’s Turnaround Strategy Hampering Its Recovery?

Analyst Cavenagh Research said, “Despite these robust earnings, I maintain a cautious stance on AMD's commercial momentum due to significant competitive challenges. In addition, there is increasingly scepticism among investors that the buzz around AI may be overhyped and the tangible, near-term financial benefits of CAPEX investments from companies such as Microsoft) Amazon, Google, and Meta are missing.”

Not all analysts were skeptical, though. Analyst Oliver Rodzianko said in a Seeking Alpha report, “AMD's data center segment achieved record revenue of $2.8B Q2 2024, marking a 115% increase YoY and accounting for nearly half of the company's total revenue—this was driven by strong sales of the instinct MI300 GPUs and EPYC CPUs. AMD's AI-focused products are gaining substantial traction.”

Rodzianko was also high on AMD’s growth in its client segment, which includes PC products. This business group saw a 49% YoY increase in revenue, totaling $1.5B. “Largely, this was driven by the rising demand for AI PCs, and the strong sales of AMD's Ryzen processors. On that note, AMD is continuing to invest in high-performance processors for laptops and desktops, which should be very accretive. I think the market for AI PCs is going to expand significantly.”

Related:At CES: AMD Looks at Adaptive Computing to Expand Reach