We recently published a list of Top 10 AI Stocks on Investors’ Radar These Days. In this article, we are going to take a look at where Advanced Micro Devices (NASDAQ:AMD) stands against other top AI stocks on investors’ radar these days.
The debate around AI systems hitting a “data wall” or plateau is heating up in the tech industry with many arguing that the performance of AI models is not showing signs of further improvement amid a lack of quality inputs, causing scaling issues in the industry.
CNBC’s Deirdre Bosa recently discussed this debate in a program and said:
“All it feels like anyone is talking about right now in tech is this debate over scaling laws and a data wall, which continues to rage in Silicon Valley. This is the idea that more data and bigger models will always lead to better AI, with some arguing that progress has peaked or is starting to plateau. Put another way, it’s a debate over a core assumption in AI that could have massive implications for the industry, from valuations to the GPUs powering it, and of course, the Nvidia story. I was at the Newcomer AI conference yesterday here in San Francisco. It was the theme of the day, with everyone from Scale AI’s Alexander Wang to Anthropic’s Dario Amodei to Databricks’ Ali Ghodsi weighing in.”
Jensen Huang was also asked about the issue of AI systems hitting a data wall and possible scaling issues in a latest earnings call. Here is what he said:
“A foundation model pre-training scaling is intact and it’s continuing. As you know, this is an empirical law, not a fundamental physical law, but the evidence is that it continues to scale. What we’re learning, however, is that it’s not enough that we’ve now discovered two other ways to scale. One is post-training scaling. Of course, the first generation of post-training was reinforcement learning human feedback, but now we have reinforcement learning AI feedback and all forms of synthetic data generated data that assists in post-training scaling.”
Read Huang’s comments in detail here.
Bosa mentioned some other tech leaders pushing back against the idea of AI hitting a data wall and said:
“…..also acknowledge that this alone isn’t enough to push AI further, and progress will come from post-training scaling, which is the development of AI applications on top of existing models. He and others say this will still require massive amounts of compute power.
An open question remains: will it be as much? A helpful way to frame that next phase of AI development is digestion or innovation. Maybe both are possible, but digestion might suggest a pullback on the huge amounts of spending and capital expenditures we’ve seen over the last few years. Innovation, on the other hand, could mean doubling down, with just another phase of development beginning. It’s still very much an open question.”
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For this article we picked 10 AI stocks currently trending on the back of latest analyst ratings and news. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 107
The Advanced Micro Devices, Inc. (NASDAQ:AMD)-powered El Capitan claimed the top spot in the 64th edition of the TOP500 list of the world’s most powerful supercomputers.
“The new El Capitan system at the Lawrence Livermore National Laboratory in California, U.S.A., has debuted as the most powerful system on the list with an HPL score of 1.742 EFlop/s,” according to TOP500. “It has 11,039,616 combined CPU and GPU cores and is based on AMD 4th generation EPYC processors with 24 cores at 1.8GHz and AMD Instinct MI300A accelerators.”
The system uses HPE’s (NYSE:HPE) Cray Slingshot 11 network for data transfer and achieves an energy efficiency of 58.89 Gigaflops/watt.
“AMD GPU cores overtook NVIDIA (NASDAQ:NVDA) for the first time, boosted by El Capitan which accounted for ~37% of AMD’s total accelerator cores on the list,” said Wells Fargo analysts, led by Aaron Rakers, in a note on the rankings. “AMD’s share of CPU cores hit an all-time high at 29% and systems, while NVIDIA GPUs grew to 184 (ex-China) versus 166 a year ago.”
Advanced Micro Devices (NASDAQ:AMD) bulls believe the market should stop comparing the company’s chips with Nvidia and focus on its data-center growth and its competitive edge over other players like Intel. Advanced Micro Devices (NASDAQ:AMD)’s strong growth in the data center segment is indeed impressive, driven by Instinct GPU shipments and strong sales of EPYC CPUs. Advanced Micro Devices (NASDAQ:AMD) will continue to benefit from organic growth catalysts in this segment despite the competition from Nvidia. According to Goldman Sachs Research, global data center demand could surge by 160% by 2030. In the U.S., data centers are projected to use 8% of total power by 2030, up from 3% in 2022. McKinsey estimates that adding the required U.S. capacity will need over $500 billion in infrastructure investment by the decade’s end.
Advanced Micro Devices (NASDAQ:AMD)’s forward adjusted PEG ratio is about 40% lower than the median for the tech sector (XLK).
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2024 investor letter:
“Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) lagged the market after the company reported earnings results that, while generally strong, left the market wanting more. The company reported AI revenue of ~$600 million and increased its forward-looking outlook for AI revenue growth, but shares took a breather, as results missed elevated expectations after the stock’s strong performance. Despite the stock’s underperformance during the quarter, the company’s AI story remains very much intact. The growth outlook for the company is supported by better cloud demand, enterprise recovery and continued share gains ahead of the company’s new AI product launch.”
Overall, AMD ranks 7th on our list of top AI stocks on investors’ radar these days. While we acknowledge the potential of AMD, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.