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Title: Is AMD Poised to Dethrone Nvidia in 2025?

AMD is poised to make a significant stride in 2025, aiming to narrow the gap with its main competitor, Nvidia.

An AI-powered GPU, neatly housed within a circuit board. This compact yet powerful component is a...
An AI-powered GPU, neatly housed within a circuit board. This compact yet powerful component is a marvel of modern technology, capable of executing complex computations at an astonishing pace.

Title: Is AMD Poised to Dethrone Nvidia in 2025?

When it comes to semiconductor stocks, it's tough to ignore the undeniable powerhouse that is Nvidia. Over the last couple of years, this company has solidified its position as the undisputed leader in chip stocks, and its influence is only growing stronger as it marches towards the forefront in the realm of artificial intelligence (AI).

Yet, despite Nvidia's dominance, I can't help but notice that investors have become so enamored with the company that they've seemingly forgotten about other under-the-radar opportunities in the chip world. As we approach the close of 2024, I urge you to take a step back and consider the potential hidden gems lurking in the shadows.

In this piece, I'll be making a compelling case for why an investment in Advanced Micro Devices (AMD) might prove to be an excellent move right now. Could AMD be the surprise contender ready to claim the throne in 2025? I believe so.

Is Nvidia's Lead on AMD Actually that Wide?

At first glance, it might seem that Nvidia is far and away outpacing AMD in the AI race. Over the past 12 months alone, Nvidia has generated a staggering $113 billion in revenue – more than five times the revenue generated by AMD.

However, taking a closer look at where this revenue is coming from might just change your perspective on AMD's trajectory in comparison to Nvidia.

Nvidia data center revenue growth % year over year

I've broken down the annual revenue growth rates for both Nvidia's and AMD's respective data center businesses in the table below:

279%

| Category | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 || --- | --- | --- | --- | --- | --- || Nvidia data center revenue growth % year over year | 279% | 409% | 427% | 154% | 112% || AMD data center revenue growth % year over year | 0% | 38% | 80% | 115% | 122% |

409%

As you can see, Nvidia's data center business growth has significantly decelerated over the past year, while AMD's has skyrocketed from essentially nothing to a rate very nearly that of Nvidia's.

427%

Don't misunderstand me – I'm not here to suggest that Nvidia is in any kind of trouble. It's challenging to make a bear case on a company that's reporting growth in excess of 100% per quarter.

154%

But the broader point I'm trying to make is that size alone does not equate to a better investment opportunity. I'm going to delve deeper into how AMD has built a formidable competitor in the data center business and explain why I believe 2025 could be a pivotal year for the company.

112%

Why 2025 Might Be a Turning Point for AMD

One of the primary reasons behind Nvidia's recent success with its data center operations stems from the fact that the company had a veritable monopoly on the graphics processing unit (GPU) landscape for years. However, the successful launch of AMD's MI300 accelerator has finally caught up to Nvidia's first-mover advantage.

AMD data center revenue growth % year over year

There are those who might argue that Nvidia's next-generation Blackwell GPU architecture is going to snuff out any chance of AMD dethroning the chip king. But consider that many of Nvidia's own customers, including heavyweights like Microsoft and Meta Platforms, have already adopted AMD's MI300 GPUs for their AI operations.

0%

In addition, these tech giants, along with Alphabet and Amazon (both of which also rely on Nvidia tech), are pouring significant resources into the development of their own in-house chips as a means to reduce their reliance on external vendors.

38%

Perhaps most importantly, AMD is not resting on its laureurs. The company has a raft of new GPUs in the pipeline – first up is the MI325X later in 2025, followed by the MI400 architecture in 2026.

80%

At this point, I don't see Nvidia's Blackwell launch as the threat it might have once appeared to be. AMD's pace of innovation is nothing short of astonishing, and given that investment in AI infrastructure is only expected to continue growing for the next several years, I firmly believe that the MI325X and MI400 will be instrumental in helping AMD capture additional market share from Nvidia – especially as it begins to encroach on the latter's own customer base.

115%

Is AMD Stock a Buy Right Now?

122%

At this moment in time, AMD is trading at a forward price-to-earnings (P/E) multiple of 29. By comparison, Nvidia's forward P/E ratio has climbed to 34.

With the anticipated launch of Nvidia's Blackwell architecture on the horizon, I have to admit that I find it tough not to think that investor expectations will continue to rise. If, however, Nvidia fails to meet those expectations, there might just be a panic-driven sell-off on the cards.

On the other hand, AMD's current valuation appears to be more than a little discounted when compared to Nvidia. Given the existence of AMD's strong MI300 footprint, combined with the forthcoming MI325X, which is poised to go head-to-head with Blackwell, I'm convinced that AMd will continue to make significant strides against Nvidia, particularly among its own customer base.

All things considered, it seems like the perfect time to invest in AMD stock and hold on tight.

After analyzing the data, it's clear that AMD's data center revenue growth has significantly outpaced Nvidia's in recent quarters, indicating a potential shift in the market. With the upcoming launch of AMD's MI325X and MI400 architectures, investors might want to consider diversifying their portfolio by investing in AMD stock.

Furthermore, despite Nvidia's dominance in the AI field and its impressive revenue, the company's growth rate has decelerated, while AMD's has seen a substantial increase. This suggests that AMD might be a promising investment opportunity for financially savvy individuals looking to invest in the chip sector.

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