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# AMD's Earnings Call: The AI Reckoning

## The Widening Gap Between AMD and Nvidia

AMD's latest earnings call was a pivotal moment, revealing the company's place in the AI revolution. While AMD posted record revenues of $6.8 billion, a closer look at the numbers shows a concerning trend.

AMD's data center revenues, which account for its biggest and fastest-growing business unit, reached $3.5 billion - a 122% year-over-year increase. However, this pales in comparison to Nvidia's data center revenues, which clocked in at $26.3 billion, up 154% year-over-year and representing 88% of Nvidia's overall revenue.

This stark difference highlights a crucial insight: Nvidia's AI ecosystem is significantly more dominant than AMD's. Nvidia's Hopper GPUs have become the industry standard for both AI training and inference, with tech giants like Google, Amazon, Microsoft, and Meta Platforms buying hundreds of thousands of these chips.

## The AI Exposure Gap

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The data center revenue disparity between AMD and Nvidia is further exacerbated by the fact that only 25-35% of AMD's total revenue is directly tied to AI, compared to a staggering 88% for Nvidia. This means that for every dollar invested in Nvidia, 88 cents are exposed to the AI market, while for AMD, it's only 25-35 cents.

As the global artificial intelligence market is expected to grow by nearly 11 times over the next 9 years, and the data center accelerator market is projected to more than 5x by 2032, this AI exposure gap becomes increasingly significant.

## The Challenge of Competing with Nvidia

AMD has made strides in developing its own AI accelerators, such as the Mi 300X and the recently announced Mi 325X, which claim to outperform Nvidia's offerings by 20-40% in inference and match their performance in training. However, the challenge lies in the pace of Nvidia's innovation.

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Nvidia's Blackwell architecture, set to launch in the coming weeks, is expected to be four times better at AI training and 30 times better at AI inference than Hopper. This massive leap in performance gives Nvidia significant pricing power, with gross margins of 76% compared to AMD's 50%.

## Risks and Diversification

Another risk for AMD is the company's diversification across multiple business units, including client PCs, gaming, and embedded chips, which account for nearly 50% of its revenue. This breadth of operations may hinder AMD's ability to focus solely on the AI market, where Nvidia's laser-like focus has proven advantageous.

Additionally, AMD's reliance on the x86 CPU ecosystem, while still dominant, faces the potential challenge of the growing adoption of ARM-based architectures by competitors like Nvidia, Google, and Amazon.

## Implications for AMD's Ranking

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Given the widening gap between AMD and Nvidia in the AI market, the author has decided to move AMD down on their list of "Stocks to Get Rich Without Getting Lucky in 2024." While AMD remains a strong company, the author believes that Nvidia's superior AI exposure and faster innovation make it a more compelling investment for those seeking to capitalize on the AI revolution.