Nvidia returns to AMD’s AI chip claims – what investors need to know

By | December 19, 2023

data center infrastructure information technology

At its recent AI event, Advanced micro devices (NASDAQ: AMD) fired shots and claimed supremacy in AI inference over the pioneer and leader of the AI ​​system Nvidia (NASDAQ: NVDA). AMD stock is in rally mode as investors increase their expectations for the scrappy chip designer in 2024.

However, Nvidia shot back and poured a bucket of cold water on AMD’s claims. What should investors make of these claims about AI chip supremacy, and is there an easy way for investors to measure real AI business performance?

Nvidia volleys, and AMD doubles down on the claims

In a previous article, I cited AMD’s claim that its latest AI system, the upcoming MI300X, outperforms the competition in AI inference by 1.4x to 1.6x. AI inference is computer work after an AI model has been trained and users start using the model to answer questions or perform another task.

AMD specifically compared the MI300X to Nvidia’s DGX H100 system, which will make way for the more powerful DGX GH200 system later in 2024. That latest and greatest from Nvidia will likely turn the tables again.

But as for the claims about the MI300X versus the H100, Nvidia was quick to point out a few days later that AMD’s performance benchmarks did not use the H100 with Nvidia’s proprietary software stack on it, which, by the way, is bundled with the H100. system at no additional cost (although the H100 does cost a premium), as much of Nvidia’s software for its chips and systems usually is. Instead, AMD chose to use an H100 and MI300X for comparison, both running open-source software.

In any case, Nvidia claims that when tested “properly”, the H100 remains about 2x faster than the MI300X.

To add to the intrigue: a few days then, AMD has doubled down on its benchmark claims with some updates of its own. AMD continues to improve its proprietary AI software stack, called ROCm, and says further optimizations have made the MI300X even more attractive for AI inference over the H100.

AMD's latest slide claims it still outperforms the Nvidia H100 by up to 2x, based on its benchmarking.AMD's latest slide claims it still outperforms the Nvidia H100 by up to 2x, based on its benchmarking.

Chart source: AMD.

What should an investor believe?

All these claims about benchmarking in the AI ​​race can be confusing or even downright meaningless to investors with minimal technical background in AI and computer systems engineering. Is there an easier way to keep up?

Lean heavily on financial results in the AI ​​race. After all, there is no better measure for the layman than following people’s purchasing decisions actually build AI infrastructure. While Nvidia is still in the early stages of building out a new AI infrastructure globally, it has already established itself as a leader, and it won’t be that easy for AMD (or even Intel (NASDAQ: INTC)) just to catch up.

Company

Data center and AI segment revenue in third quarter

YOY Increase (decrease)

Nvidia

$14.5 billion

282%

Intel

$3.8 billion

(10%)

AMD

$1.6 billion

0%

Source: Nvidia, Intel and AMD. Note: Intel and AMD data are for the third quarter of fiscal 2023. Nvidia data are for the third quarter of 2024, which ended in October 2023. YOY = year over year.

As for AMD, will 2024 be the year when the tables can be turned on Nvidia’s AI dominance? Perhaps, although the only specific guidance publicly discloses that the AI ​​GPU (including the MI300X) expects sales of “at least $2 billion” by 2024. That makes AI systems a hit for AMD, but there will still be a big gap to fill up. Nvidia, as Nvidia also expects to further grow its data center and AI businesses.

AMD and Nvidia shares are both trading at a small premium, tapping into Wall Street analysts’ early assumptions for what is expected to be a year of blistering earnings growth for both semiconductor companies. Nvidia trades for 25 times next year’s consensus estimates, but AMD trades for almost 37 times expected earnings. Given this situation, both stocks have a lot to gain over the next decade, but a premium price makes them mid-dollar price contenders in my opinion.

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Nicholas Rossolillo and his clients have positions in Advanced Micro Devices and Nvidia. The Motley Fool holds positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 calls $57.50 on Intel, long January 2025 calls $45 on Intel, and short February 2024 calls $47 on Intel. The Motley Fool has a disclosure policy.

Nvidia backtracks on AMD’s AI chip claims — What investors need to know was originally published by The Motley Fool

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