AMD Stock Surges as Amazon Considers Partnership for New AI Chips, CEO Optimistic

AMD's stock soars as Amazon considers partnership for new AI chips. CEO's upbeat outlook and potential market growth make AMD a key player in the AI wave.

Jun 14, 2023 - 07:41
Jun 14, 2023 - 07:41
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AMD Stock Surges as Amazon Considers Partnership for New AI Chips, CEO Optimistic
AMD Stock Surges as Amazon Considers Partnership for New AI Chips, CEO Optimistic

In a potential game-changing move, Advanced Micro Devices (AMD) saw a remarkable surge in stock prices, signifying a positive outlook for investors. During pre-market trading on Wednesday, AMD shares experienced an impressive 2% spike, taking the top spot as Yahoo Finance's most trending ticker. This surge was triggered by an exclusive report from Reuters, indicating that Amazon's cloud arm is actively exploring the possibility of utilizing AMD's cutting-edge AI chips.

Despite Yahoo Finance's attempts to solicit a comment, Amazon remained tight-lipped regarding their stance on the matter. This report follows AMD's recent announcement of their highly anticipated AI chips, the MI300, which directly rival Nvidia's formidable superchips.

Distinguishing itself with a substantial advantage in memory capabilities, the MI300 chips offer an astonishing capacity of up to 192GB. This significant advancement positions AMD's new chip as a prime candidate for integration into large language models (LLMs) commonly utilized in various AI applications.

Securing a contract with Amazon Web Services would undoubtedly be a monumental achievement for AMD, bolstering confidence in their innovative offerings and potentially allowing them to make significant inroads into Nvidia's market share.

During an exclusive interview with Yahoo Finance Live, Dr. Lisa Su, Chair and CEO of AMD, expressed unwavering optimism about the demand for their AI chips once they hit the market later this year. Dr. Su emphasized the extraordinary potential of the data center market, particularly in the realm of AI chips, projecting a staggering worth of approximately $30 billion for this year alone. Furthermore, she anticipates sustained annual growth rates of over 50% for the next three to four years, ultimately culminating in a market worth approximately $150 billion.

While Dr. Su refrained from disclosing specific pricing details for the M1300 chip, she assured stakeholders that AMD possesses the capacity to meet the formidable demand for chips in 2024. Despite a 3.6% decline in AMD shares on Tuesday, attributed to investors' disappointment over the lack of pricing information and launch customers, industry analysts continue to hold a positive view. Notably, Salesforce CEO Marc Benioff, alongside Baird analyst Tristan Gerra, predicts that AMD is strategically positioned to capitalize on the impending wave of AI technology.

Gerra, in a comprehensive research note, raised his 2024 earnings-per-share (EPS) estimate for AMD from $4.09 to an impressive $5.50. Consensus estimates on Yahoo Finance suggest a figure of approximately $4.13 per share for 2024. The revision in Gerra's estimate reflects the growing sentiment that AMD, while still trailing Nvidia in terms of ecosystem maturity, is poised to become a significant beneficiary of the medium-term AI growth trend.

As the story unfolds, the market eagerly awaits further developments on the potential collaboration between AMD and Amazon, recognizing the transformative impact such a partnership could have on the future of AI chip technology.

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