How AMD Is Gaining Ground Against NVIDIA

Advanced Micro Devices (Nasdaq: AMD) is methodically battling for share against market leader NVIDIA (Nasdaq: NVDA) in a multipronged approach that's proving successful in building its position, albeit as a distant second.

For example, AMD is working its way into AI infrastructure service providers, a niche dominated by NVIDIA. In a recent example, AMD led a $333-million round investment in GPU-as-a-service provider Vultr last month, ensuring a favorable position in the infrastructure on which Vultr services are based. The deal followed an agreement announced in September 2024 that highlighted Vultr’s adoption of AMD’s Instinct MI300X GPU and ROCm software for delivery over the service provider’s cloud platform.

More GPU Service Deals

The Vultr deal isn’t anomalous. The following service providers also have adopted AMD as key supplier of AI infrastructure components:

Cirrascale Cloud Services. This spinoff of longtime datacenter hardware provider Cirrascale (which sold its hardware division to workstation manufacturer BOXX Technologies in 2017) bases its services on a variety of components, including ones from AMD (the Instinct MI300X and MI250) as well as those from Cerebras, NVIDIA, and Qualcomm. Cirrascale, based in San Diego, is headed by CEO PJ Go (ex-QuickFire Networks).

TensorWave. A Las Vegas-based startup founded in 2023, TensorWave sells GPU-as-a-service based exclusively on AMD MI300X accelerators and software. According to founders Darrick Horton, CEO; Piotr Tomasik, COO; and Jeff Tatarchuk, chief growth officer (CGO); NVIDIA’s dominance in the AI chip market is limiting AI industry growth due to supply-chain constraints and long wait times for GPU delivery. TensorWave is eager to introduce a “viable alternative” to the market leader.

In October 2024,TensorWave announced a Simple Agreement for Future Equity (SAFE) funding round of $43 million, led by Nexus VP with participation from Maverick Capital, Translink Capital, Javelin Venture Partners, StartupNV, and AMD Ventures.

Targeted Market Expansion

As initially reported in the Wall Street Journal on January 8, AMD is also looking to compete against NVIDIA by penetrating specific vertical market segments. As part of this strategy, the company recently invested $20 million in Absci (Nasdaq: ABSI), a public drug discovery company headquartered in Vancouver, Washington. “We’re now expanding our focus into vertical markets and prioritizing healthcare, where we can immediately have an impact on society,” AMD CTO Mark Papermaster told the WSJ.

AMD is also intent on M&A as a mechanism for AI growth. In August 2024, AMD entered an agreement to purchase ZT Systems, a maker of compute and storage servers for AI environments, for an estimated $4.9 billion. “ZT adds world-class systems design and rack-scale solutions expertise that will significantly strengthen our data center AI systems and customer enablement capabilities,” stated AMD CEO Lisa Su in the press release.

Second Place But Growing

By carefully selecting areas where it can compete against NVIDIA, AMD is strengthening its position in AI chips, albeit as a distant second to the market leader.

The numbers prove the solidity of AMD's position. For its latest quarter ended September 28, 2024, AMD reported $3.5 billion in datacenter revenue, a 122% increase year-over-year (y/y). For NVIDIA’s latest quarter, which ended October 27, 2024, the company posted $30.8 billion in datacenter sales, up 112%.

Notably, AMD’s datacenter strength is centered not just in its GPUs but in its EPYC CPUs, which are designed for AI workloads in large datacenters. Jefferies equity analyst Blayne Curtis reported in his latest investor note that in November 2024, AMD’s EPYC Genoa chip comprised 62.9% of all CPU instances sold in the month. In comparison, Intel (Nasdaq: INTC) accounted for 31.6% of new instances.

Success in a Hot Market

If AMD stays a distant second to NVIDIA, its market position is solid and profitable. In his note to investors on January 6, Jefferies analyst Blayne Curtis noted that market share for AMD accelerators has doubled since August 2024, though sales stayed flat for the month of November, maintaining AMD’s share of the market at 5.3%. NVIDIA, meanwhile, grabbed 98% of new accelerator instances, bringing its total market share to 85%.

Through its focused strategy, AMD is nibbling away at a portion of a lucrative market. In its announcement about the ZT Systems buy, AMD forecast the TAM for AI accelerators to be $400 billion by 2027. And judging by recent news, the company is aiming for a solid share of that.

Futuriom Take: AMD’s share of the AI infrastructure market is based on strategically selected opportunities that appear to be growing its overall bite of a rapidly expanding market. While it will remain a distant second to NVIDIA for the foreseeable future, the large market opportunity portends AMD’s ongoing success.