Advanced Micro Devices (AMD) reported its fourth-quarter results on Tuesday, with investors particularly interested in the company’s AI accelerator Business. AMD expects to sell at least $3.5 billion of data center GPUs in 2024, and has enough supply to meet additional customer demand.
While the AI chip business is flourishing, other parts of AMD are expected to face challenges. The gaming business, which includes gaming GPUs and semi-custom chips for major video game consoles, is projected to have a tough year.
AMD’s semi-custom chips power Sony’s PlayStation 5 and Microsoft’s latest Xbox game consoles, providing a reliable revenue stream. However, as the current game console generation enters its fifth year, semi-custom revenue is expected to decline substantially, leading to a significant double-digit percentage decline in gaming revenue in 2024.
In addition, the gaming GPU market is becoming more competitive, with AMD remaining in a distant second-place position. Increased availability of GPUs and the bottoming out of the PC market are driving up shipments, but AMD faces strong competition, especially at the high end, where Nvidia dominates.
Looking ahead to 2024, AMD expects the data center and PC segments to report strong growth, driven by the AI chip ramp and solid demand for EPYC server CPUs. However, the gaming and embedded segments are expected to suffer significant declines.
Overall, while AMD’s AI chip business is set to grow strongly this year, the outlook for 2024 is uncertain. The company’s stock price has more than doubled in 2023, partly due to optimism about AI chips, but the challenges in the gaming and graphics card markets pose a risk to future growth.
In historic context, AMD has been a major player in the semiconductor industry for many years, competing with industry giants like Intel and Nvidia. Its expansion into AI accelerators and data center GPUs represents a strategic shift in focus as it seeks to capture new opportunities in the growing AI and cloud computing markets.
Disclaimer: Timothy Green holds positions in Intel and The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and Nvidia, as well as recommending options for Intel. The Motley Fool has a disclosure policy.
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