AMD projects revenue growth amid rising AI chip demand
- AMD's revenue has significantly increased from $6.7 billion in 2019 to approximately $26 billion in 2024.
- The company expects to continue growth driven by advancements in AI technology and the development of new GPUs.
- Given the growth trends, reaching a stock price of close to $330 in the coming years is a real possibility.
In the competitive landscape of semiconductor manufacturing, AMD has shown remarkable growth in its revenue, escalating from $6.7 billion in 2019 to an estimated $26 billion by 2024, reflecting an annual growth rate exceeding 31%. This impressive revenue surge is expected to continue, with forecasts suggesting that AMD could achieve a growth rate of approximately 35% per year over the next two years. The driving force behind this expansion is primarily attributed to advancements in accelerated computing and a strong demand for new graphics processing units (GPUs). The acceleration of artificial intelligence (AI) capabilities has presented AMD with significant growth opportunities as GPUs have emerged as critical components for running AI workloads. AMD's focus on catering to this trend was recently highlighted during its AI Day, where the company unveiled its MI350 lineup, boasting four times the AI compute performance of the previous model. Despite fierce competition from Nvidia, which currently leads the market with its well-established hardware and software ecosystem, AMD aims to capture a share of this burgeoning market. Moreover, the pricing landscape of AI chips has shifted, with reports indicating AMD plans a substantial increase in the cost of its advanced Instinct MI350 AI GPUs, from $15,000 to $25,000, a staggering 70% hike. This adjustment suggests a strategic positioning to leverage the growing demand for high-performance AI chips in various industries. The interest from major companies, such as Oracle opting for AMD's chips for their latest supercluster dedicated to AI workloads, underscores the potential for AMD in this segment. As the AI accelerator chip market is projected to reach around $400 billion by 2027, AMD is poised to benefit significantly from ongoing trends. The predicted revenue growth, coupled with an improving margin structure – with adjusted net margins anticipated to rise from approximately 11% in FY 2019 to over 21% by FY 2024 – could allow AMD to achieve further financial milestones. Given this trajectory, AMD's stock price could feasibly reach values around $330 within the next few years, especially if earnings grow significantly as forecasted.