AMD has recently launched a new artificial intelligence (AI) chip. It can compete with the data center graphics processor of the world's renowned chip manufacturer Nvidia. Data center graphics processors are known as GPUs. The production of AMD's new chip 'Instinct MI325X' is likely to start in the current year itself.

If AMD's AI chips are seen as a close alternative to Nvidia's products by developers and cloud giants, it could put pricing pressure on Nvidia. Demand for Nvidia's GPUs has been strong over the past year, leading the company to generate gross margins of about 75%.

Need for large data centers
Advanced generative AI like OpenAI's ChatGPT require large data centers full of GPUs to perform the necessary processing, creating demand for more companies to provide AI chips.

Over the past few years, Nvidia has dominated most of the data center GPU market, but AMD is in second place in this segment. Now AMD is aiming to catch up with its Silicon Valley rival or at least capture a larger share of the market. AMD said it will be valued at $500 billion by 2028. "The demand for AI is increasing; far exceeding expectations. The rate of investment is increasing everywhere," AMD CEO Lisa Su said.

AMD has not yet disclosed the names of new cloud or internet clients for its Instinct GPUs, but the company has previously stated that both Meta and Microsoft buy its AI GPUs and OpenAI uses them for some applications. The company has not yet disclosed the price of the Instinct MI325X. Competition with Nvidia's Blackwell AMD's MI325X chip will compete with Nvidia's upcoming Blackwell chips. According to Nvidia, Blackwell will start shipping early next year. AMD's latest data center GPU may attract interest from investors who are looking for other companies to benefit from the AI ​​boom. AMD is only up 20% so far in 2024 while Nvidia's stock has risen more than 175%. According to market experts, Nvidia has more than 90% of the market for data center AI chips. AMD's stock fell 4% on Thursday, while Nvidia's stock gained nearly 1%. What is the challenge for AMD? AMD's biggest challenge in gaining market share is that its rival uses its own programming language, CUDA, which has become a standard among AI developers. On the other hand, AMD said this week that it is improving its software ROCm, so that AI developers can easily switch their AI models to AMD's chips. Competition with Intel too AMD's main business has been central processors (CPUs). The company said in July that AMD's data center sales during the June quarter more than doubled to $2.8 billion compared to last year, with AI chips contributing only $1 billion. The company said AMD accounts for about 34% of the total dollars spent on data center CPUs. This is still less than Intel, which remains the boss of the market with its Xeon line of chips. AMD is aiming to change this with a new line of CPUs. It is called EPYC 5th Gen.