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

The announcements were widely expected based on AMD's launch earlier this year. They failed to cheer investors, who sent AMD shares down nearly 5% in afternoon trading. Some analysts attributed the decline to the absence of new major cloud computing customers for the chips.

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 driven a huge rally in chip stocks over the past two years, with AMD shares rising nearly 30% from recent lows in early August.

“No new customers have been announced so far,” said Qinghai Chan, research analyst at Summit Insights, adding that shares gained ahead of the event in anticipation of “something new.”

Santa Clara, Calif.-based AMD said vendors like Super Micro Computer will begin shipping its MI325X AI chip to customers in the first quarter of 2025. AMD's design is intended to compete with Nvidia's Blackwell architecture.

The MI325X chip uses the same architecture as the already available MI300X, which AMD launched 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 predicts AI chip sales will exceed $500 million in 2024.

New servers, PC chips

AMD's Su also said at the event that the company currently has no plans to use contract chipmakers other than Taiwan's TSMC for advanced manufacturing processes, which are used to quickly produce AI chips.

“We would love to use more capacity outside of Taiwan. We are very aggressive in using TSMC facilities in Arizona,” Su said.

AMD also revealed several networking chips that help move data between chips and systems within data centers.

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

The main chip has around 200 processing cores and costs US$14,813. The entire processor line uses the Zen 5 architecture, which offers a speed gain of up to 37% thanks to advanced AI data processing.

In addition to data center chips, AMD announced three new PC chips aimed at laptops based on the Gen 5 architecture. The new chips are tuned to run AI applications and will be capable of running Microsoft's Copilot+ software.

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

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

Data center revenue is a proxy for the AI ​​chips needed to build and run AI applications

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