We recently compiled a list of the 10 AI Stocks to Watch Now. In this article, we are going to take a look at where Advanced Micro Devices, Inc. (NASDAQ:AMD) stands against the other AI stocks.
The tech world was already spooked when it got to know AI models could be developed more cheaply and efficiently. However, the landscape is shifting even further now that DeepSeek has revealed some cost and revenue data related to its V3 and R1 models.
Its potential for massive profit margins — up to 545% in ideal conditions — highlights just how effective AI models can be. The new information from DeepSeek reveals the profit margins from less computationally intensive “inference” tasks. This is the stage after training that involves trained AI models making predictions or performing tasks, such as through chatbots.
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In a GitHub post published on Saturday, DeepSeek revealed that if we assume that the cost of renting one H800 chip is $2 per hour, the total daily inference cost for its V3 and R1 models is $87,072.
In comparison, the theoretical daily revenue generated by these models is $562,027, leading to a cost-profit ratio of 545%. In a year, this would add up to just over $200 million in revenue.
However, DeepSeek has cautioned that its “actual revenue is substantially lower” because the cost of using its V3 model is lower than the R1 model. Moreover, only some services are monetized as web and app access is free and developers pay less during off-peak hours.
DeepSeek’s AI models are notably a product of what is known as “distillation”. Distillation, now a buzz word in the tech world, is a technique used to make cheaper and more efficient AI models. This process involves taking a large AI model, called the ‘teacher,’ and allowing it to train a smaller, more efficient ‘student’ model.
Eventually, this helps companies transfer knowledge from big AI systems into smaller, faster, and cheaper versions. Companies such as OpenAI, Microsoft, and even Meta are joining in on the bandwagon to develop such models. Thanks to this model, AI models can be made cheaply and efficiently, allowing businesses to save money while keeping their AI performances high.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close up of a complex looking PCB board with several intergrated semiconductor parts.
Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 107
Advanced Micro Devices, Inc. (NASDAQ:AMD) develops semiconductors, providing processors and graphics technologies for gaming, data centers, and AI-driven high-performance computing. On February 28, the company unveiled its much-awaited AMD RDNA™ 4 graphics architecture with the launch of the AMD Radeon™ RX 9070 XT and RX 9070 graphics cards as a part of the Radeon™ RX 9000 Series. Supercharged with artificial intelligence, these new graphic cards feature 16GB of memory and significant improvements that deliver enthusiast-level gaming experiences.
Its re-vamped raytracing accelerators and powerful AI accelerators ensure cutting-edge performance and exhilarating gaming experiences, delivering up to 40% higher gaming performance than the previous RDNA 3 architecture. The graphics cards will be available at leading board partners including Acer, ASRock, ASUS, Gigabyte, PowerColor, Sapphire, Vastarmor, XFX and Yeston beginning March 6th, 2025.
“Today, we’re thrilled to unveil the AMD Radeon™ RX 9000 Series, a significant leap forward in graphics performance powered by our next-generation AMD RDNA™ 4 architecture. These GPUs are designed to meet the demands of today’s games, delivering enthusiast-class gaming experiences to gamers everywhere, while ready to support tomorrow’s innovations. Through the power of advanced AI and Raytracing accelerators, we’re not just improving frame rates – we’re fundamentally enhancing the gaming experience. Offering incredible performance, AI-powered features, and next-gen display support at competitive price points, the Radeon RX 9000 Series delivers exceptional value for gamers looking to upgrade their systems.”
-David McAfee, CVP and GM, Ryzen CPU and Radeon Graphics AMD.
Overall AMD ranks 6th on our list of the AI stocks to watch now. While we acknowledge the potential of AMD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.