Chicago, IL – June 4, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Advanced Micro Devices AMD, NVIDIA NVDA, Microsoft MSFT and Alphabet GOOGL.

AMD-NVIDIA A.I. Rivalry Escalates with New Product Launches
The fight for AI supremacy between Advanced Micro Devices and NVIDIA is escalating, with both launching new chips at Computex 2024.

AMD is playing catch-up to NVIDIA’s dominance in the AI space, which has been riding on strong spending as the digital transformation (DX) of enterprises continues. Per IDC estimates, worldwide spending on DX is forecast to reach roughly $4 trillion in 2027, witnessing a CAGR of 16.2% between 2022 and 2027.

Gartner estimates spending on AI software to witness a CAGR of 19.1% between 2022 and 2027 to hit $297 billion in 2027. Generative AI (GenAI) software spending is expected to surge from 8% in 2023 to 35% by 2027. Deloitte expects enterprise spending on GenAI to increase 30% in 2024 from $16 billion in 2023.

This massive splurge by enterprises presents significant growth opportunities for both chipmakers.

AMD & NVIDIA Focus on Frequent Launch of Chips
Both AMD and NVIDIA are now focusing on the faster launch of AI-enabled chips to stay ahead of the competition.

At Computex 2024, AMD unveiled its Instinct accelerator roadmap that includes the new Instinct MI325X accelerator, which is planned to be available in fourth-quarter 2024. Instinct MI325X accelerator features 288GB of ultra-fast HBM3E memory that extends AMD’s GenAI performance footprint.

The next-generation CDNA 4 architecture, expected in 2025, will power the AMD Instinct MI350 Series. It is expected to drive up to 35X better AI inference performance compared to the AMD Instinct MI300 Series with AMD CDNA 3. The CDNA “Next” architecture will power MI400 series accelerators planned for 2026.

AMD unveiled the fifth generation of EPYC server processors (Turin) that leverage the Zen 5 core. It further expanded its portfolio with the launch of the Ryzen AI 300 Series, the third generation of AMD AI-enabled mobile processors, and Ryzen 9000 Series processors for laptop and desktop PCs.

At Computex, Microsoft, HP, Lenovo and Asus unveiled new PCs powered by third-gen AMD Ryzen AI 300 Series processors and AMD Ryzen 9000 Series desktop processors.

NVIDIA recently expanded its portfolio with the announcement of the next-generation AI chip architecture, Rubin, which will leverage HBM4. This follows the March announcement of Blackwell, which is currently in production and is expected to ship to customers later this year.

The most valuable chip company now plans to release new AI chip models annually instead of its previous two-year update timeline. NVIDIA also announced a plethora of new tools and software models at Computex 2024.

NVIDIA’s yearly launch decision reflects the ongoing competitive frenzy in the AI chip market and its urgency to maintain its dominant position, which is not only threatened by AMD and Intel but also by initiatives taken by Microsoft, Alphabet and Meta Platforms.

Tech Giants Spicing Up AI Race
Microsoft’s Maia 100 is designed for AI purposes. The Maia 100 AI accelerator is capable of running cloud AI workloads like large language model training and inference. It is powered by a 5-nanometer TSMC process and has 105 billion transistors.

Alphabet’s Google has introduced the Axion central processing unit (CPU) to support its AI work in data centers. Axion processors are its first tailored Arm-based CPUs designed to deliver robust performance and energy efficiency. These CPUs deliver instances with up to 30% better performance than the fastest general-purpose Arm-based instances.

Meta followed Google to introduce the next generation of the Meta Training and Inference Accelerator (MTIA), which is a family of customized chips designed for Meta’s AI workloads. MTIA will support new generative AI products and services, recommendation systems, and advanced AI research. The accelerator comes with an 8×8 grid of processing elements, which deliver increased dense compute performance (3.5x over MTIA v1) and a sparse compute performance.

Conclusion
NVIDIA has returned a whopping 121.4% year to date, outperforming AMD, Microsoft and Alphabet’s growth of 13.2%, 10.4% and 23.5%, respectively.

NVDA is enjoying dominance in the AI-space thanks to its next-generation chips with high computing power that have been the top choice for enterprises. However, AMD, with its latest products, seems well-equipped to challenge NVDA not only in the data center market but also in the growing AI-enabled consumer PC market over the long haul.

NVIDIA currently sports a Zacks Rank #1 (Strong Buy) with a Growth Score of A, a combination that offers a good investment opportunity, per the Zacks proprietary methodology. A Momentum Score of B makes NVDA an attractive pick for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.

However, investors should wait for a better entry point for AMD, which currently has a Zacks Rank #3 (Hold), given the modest growth prospect in the near term. Moreover, AMD is trading at a premium with a forward 12-month P/E of 40.11X compared with the Zacks Electronics – Semiconductors industry’s 32.92X and NVIDIA’s 38.12X, reflecting a stretched valuation.