AI tipping point is here! It's not that you can't afford Nvidia (NVDA.US) but that AMD (AMD.US) offers better value for money.

Notice that after NVIDIA (NVDA.US) released its strong fourth-quarter financial report last night, investors have repriced its competitors in the chip industry, with AMD (AMD.US) stock rising on Thursday, continuing its impressive gains so far this year. Under the leadership of CEO Su Zifeng, AMD has become the only true competitor to NVIDIA's dominant position in the global market for artificial intelligence chips with its new MI300X chip. At the end of last year, the group introduced the MI300 series aimed at supporting generative artificial intelligence technology, and launched the next generation semiconductor Instinct M1300A focused on supercomputing. Analysts suggest that the MI300X could challenge NVIDIA's dominant position in the market for large language model artificial intelligence with the H100 graphics processing unit chip. Purdy Ho, an analyst at Huatai Research, said, "We believe AMD's MI300 is one of the most capable products to challenge NVIDIA." It is worth noting that Lamini AI has announced the use of MI300, with plans to use it to train large models." He added, "Tech giants like Microsoft, Meta, Oracle, and others have committed to using the MI300 series." AMD stated last month that the new chip could generate approximately $3.5 billion in sales over the next year, as it utilizes its new products to compete with NVIDIA and meet the increasing global demand. AMD: AI market could reach $400 billion AMD's CEO stated that the artificial intelligence chip market could reach $400 billion in the next four years, doubling the forecast made by Su Zifeng in August last year, marking a significant upgrade from previous predictions. AMD's Chief Technology Officer, Mark Papermaster, said earlier this week at an event that, "When we think of $400 billion, this is an accelerator (potential market). You can imagine it as an expansion like when the Internet was first launched, you need a complete expansion, not just computation, but also networking, infrastructure, and so on. This is a new platform." However, to meet the increasing demand, AMD's production capacity is already tight, although Su Zifeng told investors last month that AMD had made "significant progress with supply chain partners and secured additional capacity to support upward demand." While this statement did not directly mention its larger competitors, it does highlight one of the main obstacles NVIDIA is facing in the near term. Chip-on-wafer-on-substrate (coos) is a key component in the production of artificial intelligence chips, and for most of the past year, it has been dragging down NVIDIA's deliveries. The world's largest chip contract manufacturer, TSMC (TSM.US), has been struggling to meet the increasing demand for its high-end stacking and packaging technologies and warned investors that "this situation may continue into next year." Supply chain issues cast a shadow over NVIDIA NVIDIA stated that it expects its next-generation chips, including the more expensive B100 Blackwell, to be "in short supply" in the near term. NVIDIA CEO Jensen Huang told investors in a conference call late Wednesday, "We expect demand to continue to exceed our supply this year, and we will do our best." "The cycle is improving, and we will continue to do our best." NVIDIA also stated that it will release the H20 chip later this year in compliance with new export regulations. NVIDIA's monopoly position in the broader artificial intelligence chip market is unlikely to be challenged by AMD in the next year or even longer. But as companies (and more governments) seek to harness the potential of artificial intelligence technology, they will look for new sources of GPUs to avoid being left behind by other high-paying customers. This could significantly accelerate AMD's recent growth rate. FOMO could boost AMD sales CFRA analyst Angelo Zino said in a recent client report, "With AMD pushing its MI300x to cloud providers, we are encouraged about the outlook for data center (graphics processing units)." "We believe expectations for GPUs are somewhat conservative and there is upside space for 2024 and 2025." Zino added that AMD will soon release a new Zen 5 chip for the personal computer market, enabling them to handle artificial intelligence tasks directly on laptops. AMD's stock is also cheaper than NVIDIA's, with a forward P/E ratio of 44 times (NVIDIA's forward P/E ratio is 57 times), reflecting NVIDIA's faster sales growth and higher overall profit margin. However, AMD's stock has still risen by 65%, while NVIDIA's stock has risen by 152%. In May last year, NVIDIA released a shocking first-quarter financial report, essentially firing the starting gun in the global artificial intelligence investment race. KeyBanc Capital Markets analyst John Vinh said, "We believe in AMD's revitalized product roadmap strategy and its compelling product attractiveness." He rates AMD stock as overweight with a target price of $270. "However, market expectations for stock price growth are high. We are concerned that any moderate decline is likely to pose significant risks to the stock based on valuations significantly above peers."