Where Will AMD Stock Be in 3 Years?

Shares of AMD have not seen the same substantial gains as those of its competitor, Nvidia, but there is a potential for this to change in the coming years.

Since October 2022, stocks have been experiencing a bull market. Around this time, the introduction of ChatGPT in November 2022 caught the attention of investors who began to chase opportunities in artificial intelligence (AI).

One of the standout sectors has been semiconductors, which have significantly benefited from the AI trend. The VanEck Semiconductor ETF has delivered an impressive return of 194% since October 2022, far exceeding the Nasdaq Composite's 88% gain and the S&P 500's 68% increase.

Nvidia has led this surge among chip stocks, with its shares skyrocketing by 1,100% since the start of the current bull market. Meanwhile, AMD's stock has appreciated by 110% during the same period, which is a commendable performance but pales in comparison to Nvidia. Nevertheless, there are signs that AMD may be on the verge of its own substantial rally.

To understand the dichotomy between Nvidia and AMD, it helps to examine Nvidia's stronghold in the market over the last two years.

Nvidia's Market Dominance

Nvidia has benefited from its first mover advantage in the AI realm, specifically in its computing and networking sectors. Its Hopper and Ampere graphics processing units (GPUs) have been in high demand, serving as crucial elements for generative AI applications. Nvidia currently holds an impressive 90% of the GPU market. While this dominance might lead some investors to overlook AMD, it's important to take a closer look.

AMD's Growing Position

In December 2023, AMD launched the MI300X data center GPU. Although this release came nearly a year after Nvidia's initial market leadership, AMD has made significant strides which are often overlooked. Major companies like Meta Platforms, Oracle, and Microsoft are integrating AMD’s MI300 accelerators into their operations alongside Nvidia’s architecture. This is a notable achievement for AMD.

Since introducing the MI300 architecture, AMD has grown its data center GPU segment from essentially nothing into a multibillion-dollar industry. This growth trajectory is impressive, especially as Nvidia's data center growth seems to be slowing. Currently, AMD holds an estimated 10% share of the GPU market, positioning it as a stronger competitor to Nvidia.

Future Prospects for AMD Stock

When the bull market began, Nvidia's market capitalization stood at about $280 billion, but it has since skyrocketed to over $3.3 trillion—more than ten times its previous value. Comparing this to AMD, which has a solid market cap of $200 billion, it appears AMD may have room to grow similar to Nvidia's past success.

Many investors may not fully appreciate AMD’s potential as it continues to upscale its data center operations. With new GPU releases planned between now and 2026, AMD is poised to create further disruption in the market. There’s a chance that investors might shift their focus from Nvidia to AMD in the future.

While Nvidia remains a viable investment opportunity, the extraordinary gains seen recently may not be repeated. Conversely, AMD seems to be at the beginning of a significant upswing. Currently, AMD looks like an appealing investment, and its stock might be considerably higher three years down the line as its involvement in the AI landscape expands.

AMD, Nvidia, Stock