AMD plans to start mass production of its next AI chip later this year

These announcements were widely expected due to AMD's launch earlier this year. They failed to console investors, who saw AMD shares fall by almost 5 percent in afternoon trading. Some analysts blamed the decline on a lack of new core cloud customers.

Shares of rival Nvidia rose 1.5 percent and Intel fell 1.6 percent.

Demand for AI processors from big tech companies like Microsoft and Meta Platform far outstrips supply from Nvidia and AMD, allowing semiconductor companies to sell as much as they can produce.

This has fueled a massive rally in chip stocks over the past two years, with AMD shares up nearly 30 percent from their recent lows in early August.

“No new clients have been announced so far,” said Qinghai Chan, research analyst at Summit Insights, adding that the company's shares rose ahead of the event on expectations of “something new.”

Santa Clara, California-based AMD said suppliers such as Super Micro Computer will begin shipping MI325X AI chips to customers in the first quarter of 2025. AMD's design aims to compete with Nvidia's Blackwell architecture.

The MI325X chip uses the same architecture as the already available MI300X, which AMD introduced last year. The new chip includes a new type of memory that AMD says will speed up AI calculations.

AMD's next-generation AI chips could put more pressure on Intel, which has struggled to establish a coherent AI chip strategy. Intel expects AI chip sales to exceed $500 million in 2024.

New servers, PC chips

Su also said during the event that the company has no current plans to hire contract chipmakers beyond Taiwan's TSMC for advanced manufacturing processes that are used to rapidly produce AI chips.

“We would like to use more production capacity outside Taiwan. We are very aggressive in leveraging the TSMC facility in Arizona,” Su said.

AMD also showed off several networking chips that help move data between chips and systems in data centers.

The company announced the availability of a new version of the server's central processing unit (CPU) design. The family of chips, codenamed Turin, includes a version of one of them designed to feed data to graphics processing units (GPUs) – which will speed up AI processing.

The flagship chip has around 200 processing cores and is priced at $14,813. The entire processor line uses the Zen 5 architecture, which provides speed increases of up to 37 percent thanks to advanced AI data processing.

In addition to data center chips, AMD announced three new PC chips for laptops based on the Gen 5 architecture. The new chips are equipped to run AI applications and will be able to run Microsoft's Copilot+ software.

In July, AMD raised its AI chip forecast to $4.5 billion annually from its previous target of $4 billion. The frenzy surrounding the creation and deployment of generative AI products has increased demand for MI300X chips.

According to LSEG estimates, analysts expect AMD to report data center revenues of $12.83 billion this year. Wall Street expects Nvidia to report data center revenue of $110.36 billion.

Data center revenues are a proxy for the AI ​​chips needed to build and run AI applications

Rising analyst earnings expectations have kept AMD and Nvidia's valuations in check despite stock gains. Both companies trade at 33 times their trailing 12-month earnings estimates, compared with 22.3 for the benchmark S&P 500 index.