Prediction: This Artificial Intelligence (AI) Stock Could Outpace Nvidia After the Next Chip Upgrade
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Nvidia (NVDA 1. 86%) has been the biggest beneficiary of the tremendous demand for artificial intelligence (AI) chips. This is not surprising, as the parallel computing ability of its graphics...
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July 3, 2025
09:00 AM
The Motley Fool
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Nvidia (NVDA 1. 86%) has been the biggest beneficiary of the tremendous demand for artificial intelligence (AI) chips
This is not surprising, as the parallel computing ability of its graphics cessing units (GPUs) makes them ideal for AI model training and inference
It is worth noting that Nvidia has been running away with the data center GPU market, with an estimated market of 92% at the end of last year
That's miles ahead of second-place Advanced Micro Devices' (AMD -0. 07%) of just 4%
However, it won't be surprising to see AMD taking market away from Nvidia thanks to its upcoming chips
Let's see why that may be the case
Image source: Getty Images
AMD is aggressively closing the gap AMD recently unveiled its AI chip roadmap at an investor event
The chipmaker used the event to launch its MI350 series of data center GPUs, mising a "4x generation-on-generation AI compute imvement and up to 35x leap in inferencing performance. " This new line of chips is manufactured on a 3-nanometer (nm) cess node
That gives it an advantage over Nvidia's generation of Blackwell cessors, which are reportedly manufactured using a 4nm node
Chips manufactured using a smaller cess node are theoretically more powerful and power-efficient, since they pack a higher number of transistors into a smaller area
As a result, the electrons need to travel in a smaller area to perform computing tasks, and they generate less heat
So, AMD's generation of AI accelerators could be better than Nvidia's offerings, at least on paper
AMD points out that its MI350 series cessors have stronger specifications compared to Nvidia's Blackwell offerings, packing in 1. 6 times more memory
It also points out that the MI355X cessor is 1. 2 times to 1. 3 times faster than Nvidia's Blackwell chips while running inference models such as DeepSeek R1 and Llama 3
More importantly, AMD is aiming to hurt Nvidia big time with its MI400 series of accelerators that are set to be launched next year
The company is going to increase the high-bandwidth memory (HBM) capacity to 432 gigabytes (GB) on the MI400 from 288GB on the MI350 series chips
What's more, AMD is going to more than double the memory bandwidth in the MI400 cessors, to 19. 6 terabytes per second
AMD points out that the MI400 will mark a significant leap in AI compute performance, which will be far greater than what it saw in the previous generational upgrade
Meanwhile, Nvidia's next generation of AI GPUs is expected to pack similar memory compared to the current generation Blackwell cessors, which means that AMD could enjoy a spec advantage on paper
A bigger memory stack will allow AMD's chips to transfer more data, while the higher bandwidth will enable faster transmission, at least theoretically
This potential advantage could spur stronger sales of AMD's AI GPUs, helping the company capture a bigger of the market
Now, AMD doesn't need to overtake Nvidia to supercharge its growth
It simply needs to capture a double-digit of the AI GPU market in the next three years
Assuming AMD can capture 10% of the AI GPU market by 2028, its revenue from this segment could hit $50 billion (based on the jected $500 billion annual revenue that the AI accelerator market is expected to hit by 2028)
This could be enough to help it der more upside than Nvidia
Why AMD seems primed for more upside AMD 2024 with just under $26 billion in total revenue
The company says that it sold more than $5 billion worth of data center GPUs last year, which means that the non-AI data center GPU es contributed $21 billion
Assuming it doesn't witness any growth in the rest of its segments over the next three years (and generates $21 billion in annual revenue from its non-AI GPU in 2028), but manages to hit $50 billion in AI GPU revenue, its annual top line could hit $71 billion after three years
The s are currently trading at 8. 4 times sales, which is almost in line with the U
Nology sector's average sales multiple of 8
Assuming that AMD trades in line with the nology sector's multiple after three years, its market capitalization could hit $575 billion based on the revenue it is expected to generate in 2028
That points toward potential gains of 150% from current levels
Nvidia, on the other hand, is trading at an expensive price-to-sales ratio of 26
However, with the company's top-line growth rate expected to slow down over the next couple of years, it won't be surprising to see Nvidia trading at a discount
As such, the possibility of AMD dering more gains than Nvidia thanks to its upcoming chips cannot be ruled out
That's why AMD looks a solid AI stock to buy right now
Harsh Chauhan has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia
The Motley Fool has a disclosure policy.
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