July 21, 2024

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Can AMD Dethrone Nvidia as the Artificial Intelligence (AI) Powerhouse?

2 min read

Nvidia‘s (NASDAQ: NVDA) development of high-end data center GPUs for processing machine learning and artificial intelligence (AI) tasks has turned it into a hypergrowth stock over the past couple of years. All of the world’s leading AI companies — including ChatGPT’s developer OpenAI, Microsoft, Alphabet‘s Google, and Amazon — use Nvidia GPUs.

Nvidia’s first-mover advantage and its lack of meaningful competitors made it one of the easiest ways to profit from the expansion of the AI market. But Advanced Micro Devices (NASDAQ: AMD), Nvidia’s biggest competitor in the gaming GPU market, is also turning its gaze toward the AI market. Could AMD eventually dethrone Nvidia as the leader in AI chips?

An illustration of a semiconductor.

Image source: Getty Images.

The rivalry between AMD and Nvidia

AMD entered the GPU market by acquiring ATI for $5.6 billion in 2006. It subsequently expanded ATI’s Radeon brand to challenge Nvidia in discrete GPUs for gaming PCs, and it leveraged that technology to create APUs — which bundle CPUs and GPUs on a single die — for PCs and gaming consoles.

AMD’s main strategy against Nvidia, which mirrored its approach to challenging Intel (NASDAQ: INTC) in the CPU market, was to constantly sell chips that were cheaper than those of the market leader. AMD’s GPUs could often provide gaming performance comparable to Nvidia’s chips, but they usually consumed more power because they used less efficient designs.

Nvidia still controlled about 80% of the discrete GPU market last year, according to Jon Peddie Research, while AMD remained a distant second with a 17% share. The remaining small share belongs to Intel, which returned to the discrete GPU market in 2022.

Nvidia didn’t make the same mistakes as Intel, which ceded a large portion of the PC CPU market to AMD through its own blunders over the past decade. Instead, Nvidia held AMD at bay with cheaper chips that targeted lower-end gamers.

AMD’s advantages in the AI market

Unlike Intel, which manufactures most of its chips at its own…

2024-02-23 06:24:00

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