After much anticipation, AMD’s MI300 chips are now being shipped. The company projected that sales of these AI chips would surpass $2 billion in 2024. AMD also revealed impressive performance benchmarks and announced partnerships with major customers and OEM partners. While AMD’s AI sales numbers are still lower than Nvidia’s, the progress they have made is a positive development. Investors should be pleased, and AMD remains a strong buy.
AMD projected that data center GPU revenue from the MI300 series would be around $400 million in Q4 2023 and exceed $2 billion in 2024 as revenue ramps up throughout the year. They expect MI300 sales to be flat from Q4 2023 to Q1 2024 due to the transition from supplying the El Capitan supercomputer to supplying large cloud customers. Beyond that, a rough projection suggests revenue of $500 million in Q2, $600 million in Q3, and $700 million in Q4, totaling $2.2 billion in 2024.
However, compared to Nvidia’s projected data center GPU sales of $60-70 billion in 2024, AMD’s market share will still be relatively small. $2 billion in sales represents approximately 3% revenue share and 5% unit share. But there is potential for AMD to surpass the $2 billion figure in 2024. The company is prepared for higher demand and could secure more orders from customers like Microsoft and Meta once early adopters have their workloads running on MI300 chips. The demand for inference workloads, where the MI300 excels, depends on the performance of AI applications being trained or launched. Positive reception of products like Microsoft’s Co-Pilot and Adobe’s Firefly could boost demand for AMD’s chips.
AMD is also focusing on improving its software limitations, which will help make its chips competitive in more workloads. The adoption of MI300 by Microsoft for GPT workloads is promising, as large language models are currently a significant AI workload. Further software improvements throughout the year could drive additional demand.
Although AMD’s market share in AI accelerators will remain small, their AI revenue will be significant relative to their current revenues. $2 billion in 2024 would represent 9% top line growth, and a continuing production ramp could bring AMD to a run rate close to $3 billion in AI chip sales in Q4 2024, representing 13% top line growth. If AMD surpasses the $2 billion figure and ends the year with a run rate of $4-5 billion in sales, AI chips would account for about a fifth of AMD’s overall business within a year. This is significant progress for AMD in the data center GPU business.
Moreover, AMD’s AI foothold can benefit its partner ecosystem. Major customers and OEMs will allocate more resources, especially engineers, to make AMD’s chips competitive. This will accelerate AMD’s efforts to compete in the AI market.
Lastly, the projected size of the AI accelerator market means that AMD’s overall revenues could double or more just from growth in AI accelerator sales. The market is expected to reach $400 billion in 2027 with a 70% annual growth rate. This opportunity should not be dismissed, as AMD has a track record of realistic forecasts, and other major players in the industry also acknowledge the enormous potential in AI.
In conclusion, AMD’s progress in the AI market, while smaller compared to Nvidia, is a positive development. With the projected growth in AI accelerator sales and the impact on AMD’s overall revenues, investors should be pleased with the company’s performance.
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