Key Points:

• AMD is a strong contender in the AI chip market, trailing only NVIDIA.
• AMD chips perform well at higher batch levels, showing competitive potential.
• Increased chip demand and domestic production make AMD a solid investment option.
• With the competition heating up for Nvidia, investors are already starting to look ahead to 2025’s best investments. See what the hype is all about here.

Douglas and Lee discuss AMD’s (NASDAQ: AMD) position in the rapidly growing AI chip industry, where it’s currently the strong number two behind NVIDIA (NASDAQ: NVDA). They reflect on AMD’s transformation from a second-tier chip maker to a major player in the industry, with its stock rising significantly over the past decade. While NVIDIA’s H100 chip currently outperforms AMD’s MI300X at lower batch levels, AMD’s chip competes and even surpasses it at higher levels, suggesting potential for further competitiveness. They express confidence in AMD’s leadership and its ability to continue innovating, especially as demand for AI chips is expected to grow. The conversation also touches on the importance of domestic chip production, given geopolitical concerns around Taiwan, and they see AMD’s focus on U.S. production as a positive. They agree that while AMD’s stock hasn’t surged as dramatically as NVIDIA’s, it presents an attractive investment opportunity, especially if there’s a market correction that pulls down tech stocks. They plan to revisit the discussion after NVIDIA’s upcoming earnings report.

Transcript:

Okay. AMD.

I mean, if you wanted a description for somebody who just doesn’t understand the chip business at all, I’d say AMD is number two in the AI chip business now.

It’s better to be number one, but this industry, this sector is exploding so fast I wouldn’t mind being number two.

Listen, being number two isn’t that bad.

And it’s funny, having lived in and I’m from Austin, Texas, you know where there was a big AMD facility, and for years, not unlike NVIDIA, it traded at two dollars, three dollars…

Because basically, they were the second-tier chip that went in a laptop or the second-tier chip that went into Gateway computers or something like that.

And literally for years, I mean, not even that long ago, less than 10 years ago, it was two or three dollars.

And just like NVIDIA, like I was saying, the stock is now, it traded over 200, and it’s actually in a level now where I think it’s really attractive in the 140 area, 145.

And, you know, way off its 52-week high, didn’t have the kind of NVIDIA run.

And like you said, they are a strong number two.

But the interesting thing is the NVIDIA chip that is the one is the H100.

And it outperforms the AMD chip, the MI300…

Is that what it is? The 300?

Yeah. The MI300X.

It outperforms that at lower batch levels.

But as that batch level gets higher, the AMD chip starts to compete and then surpass the NVIDIA chip.

Now, again, that’s huge computing power and huge computing needs at those higher batch levels.

But you’ve got to think that they’ll find a way to be more competitive at the lower levels.

And they’re run by extremely bright people.

Not unlike the NVIDIA people, they saw gaming was going to be big.

So they had a big chip for the gaming business.

And they saw that they could usurp Intel into the laptop and desktop business.

And for a long time, it was like, oh, your laptop has an AMD chip.

Well, that’s not the case anymore because they’re faster.

The chips are faster than many of the Intel chips.

And I think it’s a really, really strong company.

The other thing I like about AMD is that the need for this kind of product is only going to go up.

I understand that some of these companies are out over their skis.

Google, Microsoft, the amount of money they’re investing, they may not make that back for two, three, four years.

But if you’re selling chips, you’re getting a check, you know.

So as long as you’re producing chips at a reasonable, you know, your gross margin is very good.

I mean, it doesn’t matter.

You like people to be out over their skis because it means that they’re spending a huge amount of money.

The only time that this business may get weak is if you get to the point where companies like Microsoft have invested too much.

If you get to the point, then there’s going to be a catch-up, you know, there’s going to be a lull in sales because people are going to start to say to themselves, oh, we overspent.

And there may be some slowdown in terms of that investment.

But I think that that’s three to four years out.

So I like, I like this stock and I like NVIDIA for at least that long.

Yeah.

And more and more, all of these companies are going to push for more domestic production.

And you know, Washington is stupid, and we all know, almost regardless of who’s in the CEO office, but the chips bill has been funneling money to these big chip companies that say, look, get your production here.

Because a lot of the semiconductor production is in Taiwan.

And China’s looking at Taiwan going, it ain’t a question of if, it could be a question of when.

And if chip production in Taiwan gets shut down, the world is in a world of hurt because that would be catastrophic to the industry.

And I think for a company like AMD, who’s always tried to at least keep some production here and probably to increase their production here…

I mean, they’re in Sunnyvale, but I mean, they do have the Austin plant and other plants.

And I think on a price basis, just looking at the price of the stock, you know, it didn’t run as hard as NVIDIA.

And so like I said, at these 145 levels down from a high of close to 230, I think it makes sense now.

Good.

Yeah, I agree with that.

Well, we’ll see first, we’re going to see what NVIDIA does in terms of earnings.

Yeah, that’s going to…

You watch tech stocks dive almost across the board if those numbers are…

I think even if they hit consensus but nothing better, it’s going to get sold off.

Now, you want to think about something.

If AMD gets pulled down in the downdraft, that doesn’t mean that their results are bad.

So another opportunity may be if NVIDIA shoots themselves in the foot, you get a sell-off.

It may be that suddenly AMD is even better looking.

Yeah, I think you’re exactly right.

And, you know, NVIDIA is priced to perfection.

And once again, their earnings are supposed to be in a week or so.

They’re supposed to be just gigantic again.

But I’ve heard they’ve had some supply issues as well.

And those supply issues could interrupt production issues.

And even if the numbers are great this time, if they tap the brakes at all on the following year, the year to come and the quarters to come, that could send a stampede of selling.

Yeah, it will.

All right.

Well, we’ll be…

What we can do is when we talk about NVIDIA, which will be soon, we’ll bring…

We’ll talk about AMD again.

Right, right.

And we can even get some comparisons, but I mean, they’re both outstanding investments.

And I guess a lot of people are like, well, I’ve missed the boat.

And yeah, you missed NVIDIA at nine and you missed AMD at five, but they’re very, very solid companies that dominate the industry.

Yeah.

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