AMD Faces Investor Skepticism as AI Market Moves Toward Custom Chips

[Nomad76]

AMD is set to share its fourth-quarter results on Tuesday, Feb. 4 facing opportunities and problems in the fast-changing AI chip market as investors are expected to look closely at AMD's AI strategy. Reuters reports that experts think AMD's revenue will increase by over 22% to $7.53 billion. They expect its data center part to make up more than half of total sales at $4.15 billion. Yet, investors still worry about how AMD stands in the AI race. TD Cowen experts and Omdia believe AMD could sell $10 billion worth of AI chips this year, this is twice what AMD itself thinks it will sell, which is $5 billion. However, the scene is getting more complex with Big Tech firms like Microsoft, Amazon, and Meta making their own special chips for AI work. This move to custom chips, along with NVIDIA's strong market position and its popular CUDA software, makes things tough for AMD. The high costs of switching chipmakers also make it hard for AMD to grow its share of the market, however, the ongoing increase in AI spending by tech giants could help balance out these problems. Investors see "customer silicon and NVIDIA as the AI chip market going forward," said Ryuta Makino, analyst at AMD investor Gabelli Funds.

Supply chain issues make AMD's position more difficult as TSMC is boosting its advanced packaging ability to fix bottlenecks, while NVIDIA's production increase of its new "Blackwell" AI chips might restrict AMD's access to manufacturing resources. Yet, AMD's business has some good news, its personal computer unit should grow by almost 33% to $1.94 billion catching up to Intel.



Chinese AI firms like DeepSeek have shown up offering similar AI performance to Western rivals at cheaper prices. This has led to questions about future AI infrastructure spending, which has been pushing up chipmaker stocks. Even with these worries, the huge scale of AI progress keeps creating opportunities in the industry where Broadcom CEO Hock Tan thinks the AI market could bring in $90 billion by 2027.

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[JohH]

Why do they think AMD won't make custom chips if that's what customers want? Or is it such a scale that they won't work with AMD at all?

They've done it before for Azure. Even the national labs have bought custom chips from AMD.

 

[evernessince]

Why do they think AMD won't make custom chips if that's what customers want? Or is it such a scale that they won't work with AMD at all?

They've done it before for Azure. Even the national labs have bought custom chips from AMD.

No one said investors were smart. AMD does do a pretty good job working with clients on custom solutions (the consoles and steam deck are good examples).

Investors are just questioning everything AI right now after deepseek.

 

[Jtuck9]

"This collaborative spirit enables us to build a vibrant chiplet ecosystem that propels processing power to new heights and fuels innovation throughout the sector."

https://www.amd.com/content/dam/amd/en/documents/solutions/technologies/chiplet-architecture-white-paper.pdf

 

[AusWolf]

No one said investors were smart. AMD does do a pretty good job working with clients on custom solutions (the consoles and steam deck are good examples).

Investors are just questioning everything AI right now after deepseek.

That's what I thought. AMD is making custom chips, more than Nvidia in fact, so what's the problem?

Maybe this is the AI bubble slowly bursting, and investors pushing for a final cash load before it does?

 

[AnotherReader]

That's what I thought. AMD is making custom chips, more than Nvidia in fact, so what's the problem?

Maybe this is the AI bubble slowly bursting, and investors pushing for a final cash load before it does?

I believe the uncertainty is due to the competition from internal custom chips, e.g Meta's MTIA and Microsoft's "Azure Maia AI" (what a mouthful).

 

[Wirko]

AMD is making custom chips, more than Nvidia in fact, so what's the problem?

Those are semi-custom (not sure if this is the proper term though). They won't, and can't, design a processor that's totally different from their other processors even if they receive a huge order from Amazon etc. But they can rearrange the chiplets on their MI325 base product, perhaps add a chiplet provided by Amazon for network acceleration or data compression or dollar math, fit different HBM stacks, things like that. The UCIe standard is supposed to make it easier.

Of course all of that only works when the parties mentioned in this thread manage to rip two or three wafers out of the hands of Grinvidia, which may not happen often.

 

[SRB151]

I still just don't understand what the problem is. AMD stock drops because they don't sell a ton of AI chips all the while increasing sales and profits year over year. Then, a story posting that AI is in trouble comes along, and what happens? AMD stock drops again! Why? Because they won't be able to make any of that AI money that their stock was downgraded for the first time due to not enough exposure to the AI market. AI up, AMD down, AI down AMD down. Better sales and margins, AMD down. I don't think their stock will get back to $200 if their non AI sales tripled and profits quadrupled.

You'd hang on to more of your money in Las Vegas than you would with the tech stocks and the market.

 

[kapone32]

AMD already makes custom chips. What is the 8600G. Just because it is socketable does not make it custom,

 

[AusWolf]

I still just don't understand what the problem is. AMD stock drops because they don't sell a ton of AI chips all the while increasing sales and profits year over year. Then, a story posting that AI is in trouble comes along, and what happens? AMD stock drops again! Why? Because they won't be able to make any of that AI money that their stock was downgraded for the first time due to not enough exposure to the AI market. AI up, AMD down, AI down AMD down. Better sales and margins, AMD down. I don't think their stock will get back to $200 if their non AI sales tripled and profits quadrupled.

You'd hang on to more of your money in Las Vegas than you would with the tech stocks and the market.

Nvidia's stock is dropping, too. DeepSeek doesn't help either company, I assume. Maybe the AI bubble is actually bursting?

AMD already makes custom chips. What is the 8600G. Just because it is socketable does not make it custom,

It's not the 8600G. It's the APU you find in the Steam Deck, PS5, Xbox and so on.

 

[kapone32]

Nvidia's stock is dropping, too. DeepSeek doesn't help either company, I assume. Maybe the AI bubble is actually bursting?


It's not the 8600G. It's the APU you find in the Steam Deck, PS5, Xbox and so on.

Yes but they are essentially the same chip. That is what makes the 8700G so expensive for consumers. They could put it in a Handheld. Do you remember when 5600Gs were like $149. Those days are gone.

 

[evernessince]

That's what I thought. AMD is making custom chips, more than Nvidia in fact, so what's the problem?

Maybe this is the AI bubble slowly bursting, and investors pushing for a final cash load before it does?

Hard to say, if other AI companies start drastically cutting hardware orders as they adopt deepseek like efficiency it could greatly deflate the market. Other cheap to produce models could help that along as well.