Predicting the Future Position of AMD Shares in Three Years
In the current bull market, which began in October 2022, stocks have been on a rollercoaster ride. One sector that's experienced mind-blowing gains is the AI realm, particularly semiconductor stocks. Leader of the pack? None other than Nvidia, which has soared by an astounding 1,100% since the bull market's inception.
But wait, there's a rising star lurking in the shadows: Advanced Micro Devices, or AMD, as we like to call it. Despite AMD playing second fiddle to Nvidia with a return of 110%, it hasn't deterred analysts from seeing growth potential. In fact, they believe AMD could be on the cusp of its own Nvidia-like surge.
So, what's the deal with AMD and why all the sudden limelight? Let's dive into the nitty-gritty.
Nvidia's first-mover advantage, but...
Nvidia's dominance in the AI revolution can be attributed to its game-changing computing and networking business, specifically its Hopper and Ampere graphics processing units (GPUs). These powerhouse GPUs have been the driving force behind generative AI applications for much of the past two years, and Nvidia had a near monopoly on the scene.
As of now, Nvidia owns an astounding 90% of the GPU market, but don't hit the snooze button just yet.
...AMD could be closing in and...
AMD has made its fair share of strides in the GPU market, particularly in the data center segment. In December 2023, AMD launched its MI300X data center GPU, a year later than Nvidia's dominance, but it's been making waves with some significant partnerships and financial gains.
Hyperscalers like Meta Platforms, Oracle, and Microsoft have all added AMD's MI300 accelerators to their Nvidia architecture, which is an impressive feather in AMD's cap. But the real heavy-hitting came when AMD's data center GPU business, once a mere afterthought, skyrocketed into a multibillion-dollar operation, and it shows no signs of slowing down.
Meanwhile, Nvidia's data center operations are starting to show some cracks, paving the way for AMD to take the crown. As of now, AMD holds an estimated 10% share of the GPU market, which means it's no longer an also-ran but rather a serious contender in the race with Nvidia.
...investors may want to buy AMD stock hand over fist now, before it's too late
Back in October 2022, before the bull market, Nvidia's market cap was a mere $280 billion. Today, it's ballooned to over $3.3 trillion, a tenfold increase in just two years. But guess what? AMD's current market cap is not that far behind. With potential for growth in the data center segment, AMD could be on the brink of its own meteoric rise.
The question is: How high could AMD soar? Given the potential for more growth, AMD's current market cap of $200 billion is a steal in comparison to where Nvidia was priced back then.
Investors seeking the next big growth play could very well look to alternatives like AMD to reap the rewards, especially as AMD continues to scale its data center business. With a strong pipeline of successor GPUs lined up for release between now and 2026, AMD is poised to continue disrupting Nvidia in the GPU market.
While there's no shortage of reasons to be excited about Nvidia, the days of 1,000%-plus gains may be over. However, AMD is still in the early stages of its own epic run, and as its chapter in the AI storyline unfolds, it could be a fantastic bargain for those who jump on board early. In my humble opinion, AMD is a compelling buy right now and will be significantly higher in three years' time.
Investors might want to consider purchasing AMD stock, as its current market cap is seen as a bargain compared to where Nvidia was priced earlier, given the potential growth in the data center segment. AMD's estimated 10% share of the GPU market signifies its transition from an also-ran to a serious competitor against Nvidia.
The finance sector is keenly watching AMD's progress in the data center segment, especially with its impressive partnerships and significant financial gains. As AMD continues to disrupt Nvidia in the GPU market with upcoming successor GPUs, its stock could significantly increase over the next three years.
