After seeing a $26 increase within the first 30 minutes (nearly a dollar increase per minute) of trading already this morning, speculators anticipate the emergence of the next potential unicorn company
Chip Race Heats Up: While Nvidia's stock edged up in premarket trading on Monday, fueled by hopes of Federal Reserve interest rate cuts, analysts at Melius Research believe its rival AMD might be a better long-term investment in the artificial intelligence (AI) chip market.
Nvidia's Dominance: Currently, Nvidia holds the top spot for AI chips, particularly those used for training AI systems. AMD sits as the second-largest player in the overall AI chip market.
Shifting Focus: Inference's Rise: The market is predicted to move from developing AI models (training) to implementing them for generating results (inference). Here's where analysts believe AMD has the edge. Melius Research analyst Ben Reitzes highlights AMD's chips as potentially more suited for inference tasks.
Cloud Expansion Benefits Everyone: Reitzes expects increased spending by major cloud companies to benefit both AMD and Nvidia, along with companies like Microsoft and Meta, as they place orders for inference-specific workloads.
AMD's Recent Stumble: AMD's stock price dipped after its latest earnings report due to a data center graphics processing unit (GPU) revenue forecast that fell short of some investor expectations. However, Reitzes believes this might be due to temporary capacity constraints, expected to ease in the second half of the year, rather than a lack of demand.
Analyst's Take: While bullish on both companies, Reitzes has a more aggressive target price for AMD, suggesting a potential upside of 37% compared to Nvidia's 26%. This reflects his belief in AMD's potential to capitalize on the growing inference market.
Market Performance: Nvidia's stock has surged significantly this year, up 79% year-to-date, while AMD has seen a more modest gain of 2.2%. This is compared to the broader market's performance, with the S&P 500 and Nasdaq Composite rising 7.5% and 7.6% respectively during the same period.